1. Which of the following choices shows the correct effect on the income statement and balance sheet equation when a company records amortization on an intangible asset?

	Net Income		Assets		Liabilities		Owners Equity
A.	No effect		No effect		Increase		Decrease
B.	Decrease		Decrease		No effect		Decrease
C.	No effect		Decrease		No effect		Decrease
D.	Decrease		Decrease		Decrease		No effect
E.	Decrease		No effect		Increase		Decrease

2. Which of the following expenditures should not be treated as a start-up cost for accounting purposes?

1. Filing fees in the state in which it plans to do business.
2. Accounting and legal fees associated with forming a new company
3. Advertising costs related to the opening of the business
4. Costs related to leasehold improvements

3. Downtown Corp. purchased a patent several years ago for $1,000,000. As of 12/31/21, amortization totaling $700,000 has already been recorded on the patent.

At the end of 2021, Downtown believes the future cash flows the patent will generate will equal $225,000. It also estimates the fair value of the patent to be $200,000.

How much of an impairment loss, if any, should Downtown record in 2021 related to this patent?

1. $100,000
2. $ 75,000
3. $800,000
4. $775,000
5. $ 25,000
6. None. There is no impairment.