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Question(s) / Instruction(s):

41. Depletion expense for a period is only recognized on natural resources that have been extracted and sold during the period.

42. The cost of an intangible asset must be amortized over a 40-year period.

43. The cost of a patent should be amortized over its legal life or useful life, whichever is shorter.

44. If an acquired franchise or license is for an indefinite time period, then the cost of the asset should not be amortized.

45. When an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired.

46. Research and development costs which result in a successful product which is patentable are charged to the Patent account.

47. The balances of the major classes of plant assets and accumulated depreciation by major classes should be disclosed in the balance sheet or notes.

48. The asset turnover ratio is calculated as total sales divided by ending total assets.

49. Research and development costs can be classified as a property, plant, and equipment item or as an intangible asset.

The following questions are from the Study Guide.

s50. When constructing a building, a company is permitted to include the acquisition cost and certain interest costs incurred in financing the project.

s51. Recognition of depreciation permits the accumulation of cash for the replacement of the asset.

s52. When an asset is purchased during the year, it is not necessary to record depreciation expense in the first year under the declining-balance depreciation method.

s53. A loss on the exchange of plant assets occurs when the fair market value of the old asset is less than its book value.

s54. Depletion expense is reported in the income statement as an operating expense.

s55. Goodwill is not recognized in accounting unless it is acquired from another business enterprise.

s56. Research and development costs should be charged to expense when incurred.

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