Problem 30-1

1. An intangible asset is defined as

a. An identifiable asset without physical substance
b. A nonmonetary asset without physical substance.
c. An identifiable nonmonetary asset without physical substance.
d. An identifiable monetary and nonmonetary asset without physical substance.
2. Which of the following statements is true concerning the identifiability of an intangible
asset?
I.
An intangible asset is identifiable when it is separable, meaning, the asset could be
sold, transferred, licensed, rented or exchanged
An intangible asset is identifiable when it arises from contractual or legal right
a. I only
b. II only
c. Both I and II
d. Neither I nor II
3. Which of the following statements is true in relation to control by the entity of the
II.

I.
II.

intangible asset?
The capacity of the entity to control the economic benefits from an intangible asset
would normally stem from the legal rights that are enforceable in a court of law.
The skill of employees arising out of the benefits of training costs can be recognized

as intangible asset.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
4. An intangible asset shall be recognized if
I.
It is probable that future economic benefits attributable to the asset will flow to the
entity.
The cost of the intangible asset can be measured reliably.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
5. Which of the following statements is true concerning separate acquisition of an
II.

I.
II.

intangible asset?
If an intangible asset is acquired separately, the cost of the intangible asset can
usually be measured reliably.
If payment for an intangible asset is deferred beyond normal credit terms, the cost is
equal to the cash price equivalent.
a. I only
b. II only

c. Both I and II
d. Neither I nor II
6. The cost of an internally generated intangible asset includes all of the following, except
a. Expenditure on materials used in generating the intangible asset
b. Compensation costs of personnel directly engaged in generating the asset
c. Overhead that is necessary to generate the asset and that can be allocated on a
reasonable and consistent basis to the asset
d. Expenditure on training staff to operate the asset
7. Which of the following statements is incorrect concerning acquisition of an intangible
asset as part of a business combination?
a. The cost of the intangible asset is based on the fair value at the date of acquisition.
b. If there is an active market for the intangible asset, the fair value is equal to the
quoted price of an identical asset.
c. If there is an active market for the intangible asset, the fair value may also be
equal to the quoted price of a similar asset.
d. The fair value of an identifiable intangible asset acquired in a business
combination cannot be measured with sufficient reliability separately from
goodwill.
8. Which of the following statements is true in relation to internally generated intangible
I.

asset?
Internally generated brands, mastheads, publishing titles, customer lists and items

II.

similar in substance shall not be recognized as intangible assets.

The cost of internally generated intangible asset comprises all directly attributable

costs necessary to create, produce and prepare the asset for the intended use.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
9. All of the following expenditures are expensed when incurred, except
a. Start up costs
b. Advertising and promotion costs
c. Business relocation or reorganization costs
d. Payment in advance of delivery of goods or the rendering of services
10. Which of the following statements is true concerning amortization of intangible assets?
I.
Intangible assets with finite useful life amortized over their useful life.
II.
Intangible assets with indefinite useful life are not amortized but are tested for
impairments at least annually.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

Problem 30-2
1. It is the systematic allocation of the amortizable amount of an intangible asset over the
useful life.
a. Amortization
b. Allocation
c. Realization
d. Expiration
2. The amortization method used shall reflect the pattern in which the assets economic
benefits are consumed by the entity. If such pattern cannot be determined reliably, what is
the amortization method used?
a. Straight line
b. Production method
c. Diminishing balance method
d. Ratio of current years sales to the total expected sales
3. The factors that need to be considered in determining the useful life of an intangible asset
include all of the following, except
a. Technical obsolescence
b. Expected action of competitors
c. Expected usage of the asset by the entity
d. Residual value
4. Which of the following statements is true concerning useful life of an intangible asset?
I.
An intangible asset is regarded as having an indefinite useful life when there is no
foreseeable limit to the period over which the asset is expected to generate net cash
II.

inflows to the entity.

The useful life of an intangible asset arising from contractual or other legal rights
shall not exceed the period of those rights but may be shorter depending on the period

over which the asset is expected to be used by the entity.

a. I only
b. II only
c. Both I and II
d. Neither I nor II
5. The residual value of an intangible asset shall be presumed to be zero, except
I.
When there is a commitment by a third party to purchase the asset at the end of the
II.

useful life.
When there is an active market for the asset and residual value can be determined by
reference to that market and it is probable that such market will exist at the end of the
useful life.
a. I only
b. II only
c. Both I and II

d. Neither I nor II
6. An intangible asset acquired by way of government grant may be initially recorded at
I.
Fair value
II.
Nominal amount or zero, plus any expenditure that is directly attributable to
preparing the asset for its intended use.
a. I only
b. II only
c. Either I or II
d. Neither I nor II
7. The cost of a separately acquired intangible asset comprises its purchase price, including
import duties and non-refundable purchase taxes, and
a. Costs of introducing a new product or service
b. Costs of conducting of a business in a new location
c. Administration and other general overhead costs
d. Directly attributable costs of preparing the asset for its intended use
8. Directly attributable costs of preparing the intangible asset for the intended use include
all, except
a. Cost of employee benefits arising directly from bringing the asset to its working
condition
b. Professional fees arising directly from bringing the asset to its working condition
c. Cost of testing whether the asset is functioning properly
d. Initial operating losses
9. After initial recognition, an intangible asset shall be measure using the
a. Cost model only
b. Revaluation model only
c. Either cost model or revaluation model
d. Neither cost model nor revaluation
10. Which of the following represents the maximum amortization period mandated for an
intangible asset with finite useful life?
a. 10 years
b. 20 years
c. 40 years
d. No arbitrary cap on the useful life has been established.
Problem 30-3
1. Which item does not qualify as an intangible asset?
a. Computer software
b. Registered patent
c. Copyright that is protected
d. Notebook computer
2. Which of the following items would qualify as an intangible asset?
a. Advertising and promotion on the launch of a huge product.

b. College tuition fees paid to employees who decide to enrol in an executive M.B.A
program at Harvard University while working with the entity.
c. Operating losses during the initial stage of the project.
d. Legal costs paid to intellectual property lawyers to register a patent.
3. Once recognized, an intangible asset can be carried at
a. Cost less accumulated amortization
b. Cost less accumulated amortization and impairment loss
c. Revalued amount less accumulated amortization
d. Cost plus a notional increase in fair value since the intangible asset is acquired
4. Which disclosure is not required with respect to an intangible asset?
a. Useful life of the intangible asset
b. Reconciliation of carrying amount at the beginning and end of the year
c. Contractual commitment for the acquisition of intangible asset
d. Fair value of similar intangible asset used by an entitys competitor
5. A consideration in determining the useful life of an intangible asset is not the
a. Legal, regulatory or contractual provision
b. Provision for renewal or extension
c. Initial cost
d. Obsolescence
6. Amortization of an intangible asset with a finite useful life shall commence when
a. It is recognized as an asset.
b. It is probable that it will generate future economic benefits.
c. It is available for use.
d. The cost can be identified with reasonable certainty.
7. A brand name that was acquired separately shall initially be recognized at
a. Recoverable amount
b. Either cost or fair value at the choice of the acquirer
c. Fair value
d. Cost
8. The recognition criteria for an intangible asset include which of the following conditions?
I.
The intangible asset must be measured at cost.
II.
The cost can be measured reliably.
III.
It is probable that future economic benefits will arise from the intangible asset.
a. I, II and III
b. I and II only
c. I and III only
d. II and III only
9. Which of the following statements in relation to intangible assets is true?
I.
Intangible assets cannot be treated as having an indefinite useful life.
II.
Intangible assets with a finite useful life shall be measured initially at cost and
annually for impairment.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

10. Which of the following statements in relation to intangible assets acquired in a business
combination is true?
I.
Intangible assets acquired in a business combination shall only be recognized if they
II.

have already been recognized by the entity being acquired.

Intangible assets acquired in a business combination shall not be recognized
separately from goodwill.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

Problem 30-4
1. Which of the following does not describe an intangible asset?
a. The asset lacks physical substance.
b. The asset is monetary.
c. The asset provides long-term benefits.
d. The asset is classified as noncurrent asset.
2. Which of the following is a characteristic of an intangible asset?
a. Physical substance
b. Claim to a specific amount of cash in the future
c. Long-lived
d. Held for sale
3. Costs incurred internally to create intangible asset are
a. Capitalized
b. Capitalized if useful life is indefinite
c. Expensed when incurred
d. Expensed if useful life is limited
4. Which of the following methods of amortization is normally used for an intangible asset?
a. Sum of the years digits
b. Straight line
c. Units of production
d. Double declining balance
5. Under current accounting practice, intangible assets are classified as
a. Amortizable or unamortizable
b. Limited life or indefinite life
c. Specifically identifiable or goodwill type
d. Legally restricted or goodwill type.
6. Which type of intangible asset is amortized?
a. Limited life only
b. Indefinite life only
c. Both limited life and indefinite life
d. Neither limited life nor indefinite life
7. Entities should evaluate indefinite life intangible assets at least annually for
a. Recoverability

b. Amortization
c. Impairment
d. Estimated useful life
8. The major problem of accounting for an intangible asset is determining
a. Fair value
b. Separability
c. Residual value
d. Useful life
9. The factors considered in determining the useful life of an intangible asset include all of
the following, except
a. The expected use of the asset.
b. Any legal or contractual provision that may limit the useful life.
c. Any provision for renewal or extension of legal life of the asset
d. The amortization method used.
10. Which of the following is not an intangible asset?
a. Trade name
b. Research and development cost
c. Franchise
d. Copyright