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64.     General Products Company bought Special Products Division in 2006 and appropriately booked $250,000 of goodwill related to the purchase. On December 31, 2007, the fair value of Special Products Division is $2,000,000 and it is carried on General Product’s books for a total of $1,700,000, including the goodwill. An analysis of Special Products Division’s assets indicates that goodwill of $200,000 exists on December 31, 2007. What goodwill impairment should be recognized by General Products in 2007?
a.     $0.
b.     $200,000.
c.     $50,000.
d.     $300,000.

     65.     During 2007, Bond Company purchased the net assets of May Corporation for $950,000. On the date of the transaction, May had $300,000 of liabilities. The fair value of May's assets when acquired were as follows:
Current assets     $ 540,000
Noncurrent assets      1,260,000
          $1,800,000
How should the $550,000 difference between the fair value of the net assets acquired ($1,500,000) and the cost ($950,000) be accounted for by Bond?
a.     The $550,000 difference should be credited to retained earnings.
b.     The $550,000 difference should be recognized as an extraordinary gain.
c.     The current assets should be recorded at $375,000 and the noncurrent assets should be recorded at $875,000.
d.     A deferred credit of $550,000 should be set up and then amortized to income over a period not to exceed forty years.

     66.     The following information is available for Barkley Company’s patents:
Cost     $1,720,000
Carrying amount     860,000
Expected future net cash flows     800,000
Fair value     640,000
Barkley would record a loss on impairment of
a.     $1,080,000.
b.     $220,000.
c.     $160,000.
d.     $60,000.

     67.     Mining Company acquired a patent on an oil extraction technique on January 1, 2006 for $5,000,000. It was expected to have a 10 year life and no residual value. Mining uses straight-line amortization for patents. On December 31, 2007, the expected future cash flows expected from the patent were expected to be $600,000 per year for the next eight years. The present value of these cash flows, discounted at Mining’s market interest rate, is $2,800,000. At what amount should the patent be carried on the December 31, 2007 balance sheet?
a.     $5,000,000
b.     $4,800,000
c.     $4,000,000
d.     $2,800,000

     68.     Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2006 for $10,000,000. It was expected to have a 10 year life and no residual value. Malrom uses straight-line amortization for patents. On December 31, 2007, the expected future cash flows expected from the patent were expected to be $800,000 per year for the next eight years. The present value of these cash flows, discounted at Malrom’s market interest rate, is $4,800,000. At what amount should the patent be carried on the December 31, 2007 balance sheet?
a.     $10,000,000
b.     $8,000,000
c.     $6,400,000
d.     $4,800,000

     69.     Twilight Corporation acquired End-of-the-World Products on January 1, 2008 for $2,000,000, and recorded goodwill of $375,000 as a result of that purchase. At December 31, 2008, the End-of-the-World Products Division had a fair value of $1,700,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $1,450,000 at that time. What amount of loss on impairment of goodwill should Twilight record in 2008?
a.     $ -0-
b.     $125,000
c.     $175,000
d.     $300,000
     70.     Fleming Corporation acquired Out-of-Sight Products on January 1, 2008 for $4,000,000, and recorded goodwill of $750,000 as a result of that purchase. At December 31, 2008, the Out-of-Sight Products Division had a fair value of $3,400,000. The net identifiable assets of the Division (excluding goodwill) had a fair value of $2,900,000 at that time. What amount of loss on impairment of goodwill should Fleming record in 2008?
a.     $ -0-
b.     $250,000
c.     $350,000
d.     $600,000

     71.     In 2006, Edwards Corporation incurred research and development costs as follows:
Materials and equipment     $ 80,000
Personnel     120,000
Indirect costs      150,000
     $350,000
          These costs relate to a product that will be marketed in 2007. It is estimated that these costs will be recouped by December 31, 2009. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2006?
a.     $0.
b.     $200,000.
c.     $270,000.
d.     $350,000.

     72.     Hall Co. incurred research and development costs in 2007 as follows:
Materials used in research and development projects     $ 450,000
Equipment acquired that will have alternate future uses in future research
     and development projects     3,000,000
Depreciation for 2007 on above equipment     300,000
Personnel costs of persons involved in research and development projects     750,000
Consulting fees paid to outsiders for research and development projects     150,000
Indirect costs reasonably allocable to research and development projects      225,000
          $4,875,000
          The amount of research and development costs charged to Hall's 2007 income statement should be
a.     $1,500,000.
b.     $1,650,000.
c.     $1,875,000.
d.     $4,050,000.

     73.     Martin Inc. incurred the following costs during the year ended December 31, 2007:
Laboratory research aimed at discovery of new knowledge     $180,000
Costs of testing prototype and design modifications     45,000
Quality control during commercial production, including routine testing
     of products     270,000
Construction of research facilities having an estimated useful life of
     6 years but no alternative future use     360,000
          The total amount to be classified and expensed as research and development in 2007 is

a.     $555,000.
b.     $855,000.
c.     $585,000.
d.     $285,000.

     74.     MaBelle Corporation incurred the following costs in 2008:
Acquisition of R&D equipment with a useful life of
     4 years in R&D projects     $600,000
Start-up costs incurred when opening a new plant     140,000
Advertising expense to introduce a new product     700,000
Engineering costs incurred to advance a product to full
     production stage     350,000
What amount should MaBelle record as research & development expense in 2008?
a.     $500,000
b.     $640,000
c.     $950,000
d.     $1,340,000

     75.     Leeper Corporation incurred the following costs in 2008:
Acquisition of R&D equipment with a useful life of
     4 years in R&D projects     $800,000
Start-up costs incurred when opening a new plant     140,000
Advertising expense to introduce a new product     700,000
Engineering costs incurred to advance a product to full
     production stage     500,000
What amount should Leeper record as research & development expense in 2008?
a.     $700,000
b.     $840,000
c.     $1,300,000
d.     $1,540,000

     *76.     Shangra-La Company incurred $1,500,000 ($400,000 in 2007 and $1,100,000 in 2008) to develop a computer software product. $500,000 of this amount was expended before technological feasibility was established in early 2008. The product will earn future revenues of $4,000,000 over its 5-year life, as follows: 2008 – $1,000,000; 2009 – $1,000,000; 2010 – $800,000; 2011 – $800,000; and 2012 – $400,000. What portion of the $1,500,000 computer software costs should be expensed in 2008?
a.     $250,000
b.     $300,000
c.     $350,000
d.     $1,100,000

     *77.     Pesavento Company incurred $3,000,000 ($800,000 in 2007 and $2,200,000 in 2008) to develop a computer software product. $1,000,000 of this amount was expended before technological feasibility was established in early 2008. The product will earn future revenues of $8,000,000 over its 5-year life, as follows: 2008 – $2,000,000; 2009 – $2,000,000; 2010 – $1,600,000; 2011 – $1,600,000; and 2012 – $800,000. What portion of the $3,000,000 computer software costs should be expensed in 2008?

a.     $500,000.
b.     $600,000.
c.     $700,000.
d.     $2,200,000.


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