1. Company Q has a patent with a carrying amount of 80,000.
The company determines that the recoverable
amount is 60,000. After recognizing the impairment loss, the company incurs 5,000 in legal fees to depend
the patent. What is the total impairment loss recognized at the new carrying amount of the patent?
a. Impairment loss 20,000; New carrying amount 65,000.
b. Impairment loss 20,000; New carrying amount 60,000.
c. Impairment loss 5,000; New carrying amount 65,000.
d. Impairment loss 0; New carrying amount 85,000.
2. Company A acquired patent for 50,000. The patent has a useful life of 10 years. What is the annual
amortization expense for the patent?
a. 5,000
b. 4,000
c. 10,000
d. 2,500
3. Which of the following is not a characteristic of intangible assets?
a. Lack of physical substance
b. Identifiable
c. Long-term nature
d. Immediate cash flow generation
4. When a company acquires a franchise, the initial measurement of the franchise fee is recorded as:
a. An expense
b. A liability
c. An Intangible Asset
d. A tangible asset
5. Which of the following statements about copyrights is true?
a. They have an indefinite useful life
b. They are automatically renewed every 10 years
c. They provide exclusive rights to reproduce and distribute creative works
d. They cannot be sold or transferred
6. The useful life of intangible asset is determined by:
a. The company’s discretion
b. Legal or Contractual provisions
c. The market demand for the asset
d. The historical performance of the asset
7. Which of the following is an example of an intangible asset that may have an indefinite useful life?
a. Patent
b. Trademark
c. Copyright
d. Franchise
8. Amortization of Intangible assets is typically calculated using which method?
a. Straight-line method
b. Declining balance method
c. Units of production method
d. Sum-of-the-years- digits method
9. If an intangible asset is impaired, the loss is recognized in:
a. Other Comprehensive income
b. The income statements
c. The Statement of Changes in equity
d. The cash flow statement
10. The cost of developing a website for internal use is:
a. Always expensed
b. Capitalized as an Intangible asset
c. Capitalized only if it generates revenue
d. Not recognized under PAS 38
11. Company B purchased a trademark for 30,000 and expects it to have an indefinite useful life. How should
Company B account for the trademark in subsequent years?
a. Amortized over 10 years
b. Amortized over 5 years
c. Test for Impairment annually
d. Expensed immediately
12. Company C incurred 20,000 in research costs and 15,000 in development costs for a new product.
According to PAS 38, how much of these costs can be capitalized as an intangible asset?
a. 0
b. 1,500
c. 20,000
d. 35,000
13. Company D has a franchise agreement that costs 100,000. The franchise has a useful life of 5 years. If
Company D pays an additional 10,000 for training and setup costs, what is the total amount to be amortized
annually?
a. 20,000
b. 22,000
c. 24,000
d. 30,000
14. Company F has a trademark with a carrying amount of 40,000. Due to market changes, the fair value of the
trademark is now 30,000. What is the impairment loss that Company F should recognize?
a. 0
b. 10,000
c. 20,000
d. 30,000
15. Company H has an intangible asset with a carrying amount of 50,000. The asset is tested for impairment,
and the recoverable amount is determined to be 40,000. What is the journal entry to record the impairment?
a. Debit impairment Loss 10,000; Credit intangible Asset 10,000
b. Debit intangible Asset 10,000; Credit impairment Loss 10,000
c. Debit impairment Loss 40,000; Credit intangible Asset 40,000
d. No entry required
16. Company I developed a new technology and incurred 60,000 in development costs. The technology is
expected to generate future economic benefits. How should Company I treat these costs according to PAS
38?
a. Expense all costs
b. Capitalize all costs
c. Capitalize only if certain criteria are met
d. Capitalize and amortize immediately
