Multiple Choice

LO 11.1Which of the following would not be considered an intangible asset?

1. goodwill
2. patent
3. copyright
4. inventory

LO 11.2Which of the following statements about capitalizing costs is correct?

1. Capitalizing costs refers to the process of converting assets to expenses.
2. Only the purchase price of the asset is capitalized.
3. Capitalizing a cost means to record it as an asset.
4. Capitalizing costs results in an immediate decrease in net income.

LO 11.2If a company capitalizes costs that should be expensed, how is its income statement for the current period impacted?

1. Assets understated
2. Net Income understated
3. Expenses understated
4. Revenues understated

LO 11.3An accelerated depreciation method that takes more expense in the first few years of the asset’s life is ________.

1. units-of-production depreciation
2. double-declining-balance depreciation
3. accumulated depreciation
4. straight-line depreciation

LO 11.4The amortization process is like what other process?

1. depreciation
2. valuation
3. recognizing revenue
4. capitalization

LO 11.4If the market value of goodwill is found to be lower than the book value, goodwill is __________ and must be adjusted by __________.

1. worthless; reducing it with a credit
2. impaired; reducing it with a credit
3. impaired; increasing it with a credit
4. worthless; increasing it with a credit

LO 11.4Which of the following is true regarding special issues in accounting for long-term assets?

1. An asset’s useful life can never be changed.
2. An asset’s salvage value can never be changed.
3. Depreciation expense calculations may need to be updated using new and more accurate estimates.
4. Asset values are never reduced in value due to physical deterioration.