Ac551 Quiz 1

In: Business and Management

Submitted By gb2003
Words 347
Pages 2
1. (TCO C) The total amount of patent cost amortized to date is usually:
shown in a separate Accumulated Patent Amortization account, which is shown contra to the Patent account.
shown in the current income statement.
X reflected as credits in the Patent account.
reflected as a contra property, plant, and equipment item.

2. (TCO C) When developing computer software to be sold, which of the following costs should be capitalized?
X None of the above

3. (TCO C) Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.’s $5 par value common stock and $75,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.’s stock was selling at $7.50 per share. When Mini Corp. acquired the patent, its stock was selling for $9 a share. Mini Corp. should record the patent at what amount?
X $97,500

4. (TCO C) On January 2, 2011, Klein Co. bought a trademark from Royce, Inc. for $1,000,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Royce’s books was $800,000. In Klein’s 2011 income statement, what amount should be reported as amortization expense?
X $100,000

5. (TCO C) Harrel Company acquired a patent on an oil extraction technique on January 1, 2010 for $5,000,000. It was expected to have a 10-year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2011, the future cash flows from the patent were expected to be $600,000 per year for the next 8 years. The present value of these cash flows, discounted at Harrel’s market value of these cash flows, and discounted…...