Problem 31-3

1. Goodwill shall be recognized only when

a. It is purchased from another entity.
b. It can be established that a benefit or advantage has resulted to an entity from some
item such as good name, capable staff or reputation.
c. It is acquired through the purchase of another business entity.
d. An entity reports above normal earnings for five or more consecutive years.
2. What does the standard require with respect to accounting for goodwill?
a. Goodwill should be amortized over a five-year period.
b. Goodwill should be amortized over the expected useful life.
c. Goodwill should be recorded and never adjusted.
d. Goodwill should be recorded and periodically evaluated for impairment.
3. Goodwill should be tested periodically for impairment
a. For the entity as a whole.
b. At the subsidiary level.
c. At the industry segment level.
d. At the operating segment level or one level below.
4. An entity is performing its annual test of the impairment of goodwill for a cash generating
unit. It has determined that the fair value of the unit exceeds the carrying amount. Which of
the following statements is true concerning the test of impairment?
a. Impairment is not indicated and no additional analysis is necessary.
b. Goodwill should be written down as impaired.
c. The assets and liabilities should be valued to determine if there has been an
impairment of goodwill.
d. Goodwill should be retested at the entity level.
5. An impairment loss recognized for goodwill
a. Shall not be reversed in a subsequent year.
b. May be reversed fully in a subsequent year.
c. May be reversed partly in a subsequent year.
d. Shall be reversed in a subsequent year.

Problem 31-4
1. Purchased goodwill should
a. Be written off as soon as possible against retained earnings.
b. Be written off as soon as possible as other expense.
c. Be written off by systematic charge as operating expense over the period benefited.
d. Not be amortized.
2. The intangible asset goodwill may be
a. Capitalized only when purchased.
b. Capitalized either when purchased or created internally.
c. Capitalized only when created internally.
d. Written off directly against retained earnings.
3. In a business combination, the excess of cost of the purchase over the fair value of the
identifiable net assets acquired is

a. Other asset
b. Indirect cost
c. Goodwill
d. A bargain purchase
4. Which of the following intangible assets should be reported as a separate line item in the
statement of financial position?
a. Goodwill
b. Franchise
c. Patent
d. Trademark
5. Which of the following intangible assets should not be amortized?
a. Copyright
b. Customer list
c. Perpetual franchise
d. All of the intangible assets should be amortized.
6. Copyright should be amortized over
a. The legal life
b. The life of the creator plus fifty years
c. Twenty years
d. The useful life or legal life, whichever is shorter
7. A patent should be amortized over
a. Twenty years
b. The useful life
c. The useful life or twenty years, whichever is longer
d. The useful life or twenty years, whichever is shorter
8. When patent is amortized, the credit is usually made to
a. The patent account
b. An accumulated amortization account
c. An accumulated depreciation account
d. An expense account
9. An entity successfully defended its patent from infringement by a competitor. The cost of
this defense should be charged to
a. Patent and amortized over the legal life of the patent.
b. Legal fees and amortized over five years or less.
c. Expense of the period.
d. Patent and amortized over the remaining useful life of the patent.
10. When an entity develops a trademark, the costs directly related to securing it should
generally be capitalized. Which of the following costs associated with a trademark should
not be capitalized?
a. Attorney fees
b. Consulting fees
c. Research and development fees
d. Design costs