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28) Which of the following is the correct accounting treatment for a patent?
A) A patent must be shown as a current asset on the balance sheet.
B) A patent must be depreciated or impaired, but not amortized.
C) A patent must be capitalized and amortized over 20 years or less.
D) A patent must be expensed, not capitalized, in the period in which it is purchased.
29) Which of the following is an intangible asset?
A) plant and machinery
B) goodwill
C) building
D) land
30) The type of intangible asset related to the exclusive right to reproduce and sell a book or intellectual
property is a ________.
A) franchise
B) trademark
C) copyright
D) patent
31) On October 1, 2018, Northern Inc. purchased a patent for $204,000 cash. Although the patent gives
legal protection for 20 years, the patent is expected to be used for only 10 years. The patent has no
residual value. What will be the balance in the patent account on September 30, 2019?
A) $183,600
B) $204,000
C) $193,800
D) $102,000
32) On January 1, 2017, Apex Solutions paid $200,000 to acquire Fancy Phones, Inc., an electronic gadget-
advertising website. At the time of the acquisition, Fancy Phones’ balance sheet reported total assets of
$200,000 and liabilities of $100,000. The fair market value of Fancy Phones’ assets was $200,000. The fair
market value of its liabilities was $100,000. At the end of 2020, goodwill was measured, and its fair value
was determined to be $60,000. Record the impairment of goodwill. Omit explanation.
33) Geller Electronics paid $200,000 to acquire Tabletz, Inc., an electronic gadget-advertising website. At
the time of the acquisition, Tabletz’s balance sheet reported total assets of $200,000 and liabilities of
$100,000. The fair market value of Tabletz’s assets was $200,000. The fair market value of its liabilities was
$100,000. Journalize the acquisition of Tabletz in the books of Geller Electronics. Omit explanation.
34) On October 1, 2018, Natural, Inc. purchased a patent for $100,000 cash. Although the patent gives
legal protection for 20 years, it is expected to be used for only eight years. Journalize the purchase of the
patent. Omit explanation.
35) On October 1, 2018, Mobile, Inc. purchased a patent for $100,000 cash. Although the patent gives legal
protection for 20 years, it is expected to be used for only eight years. The patent has no residual value.
Journalize the amortization expense for 2018. Assume straight-line amortization. Omit explanation.
36) On January 1, 2019, Ennis, Inc. purchased a patent for $200,000 cash. Although the patent gives legal
protection for 20 years, the patent is expected to be used for only 10 years. The patent has no residual
value. Journalize the amortization expense for 2019. Assume straight-line amortization. Omit
explanation.
37) If a company uses the contra account, Accumulated Amortization, this account is typically shown on
the balance sheet.
38) Which of the following statements, regarding the reporting of intangible assets, is correct?
A) If a company uses the contra account, Accumulated Amortization, this account is typically shown on
the balance sheet.
B) Amortization expense is reported on the balance sheet.
C) Intangible assets are shown only at their net book value.
D) All intangible assets are shown on the balance sheet at fair market value on balance sheet date.
39) For each of the following assets, provide a description and state the related expense.
Asset
Description
Related Expense
Plant Asset
Natural Resource
Intangible Asset
operation of a business.
Natural Resource
An asset that comes from the
earth and is consumed.
Depletion
Intangible Asset
An asset, with no physical form
that is valuable because of the
special rights it carries.
Amortization
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Learning Objective 9-6
1) The asset turnover ratio measures the amount of net sales generated for each average dollar of total
assets invested.
2) The asset turnover ratio is calculated by dividing cost of goods sold by average total assets.
3) Maple Corp. had net sales of $204,550 for the year ended December 31, 2017. Its beginning and ending
total assets were $83,200 and $116,500, respectively. Determine Maple’s asset turnover ratio for the year
ended December 31, 2017. (Round your answer to two decimal places.)
A) 0.49 times
B) 2.46 times
C) 1.16 times
D) 2.05 times
4) The asset turnover ratio measures ________.
A) how efficiently a business uses its sales to finance the assets
B) how efficiently a business uses its average total assets to generate sales
C) how efficiently a business uses its net profit to finance the assets
D) how the ending inventory helps increase the value of assets
5) On January 1, 2017 Hilldale, Inc. had total assets of $368,000. During the year, the company purchased
new machinery worth $89,000 and promised to pay the amount due after two years. Throughout the year,
it earned revenue of $56,000 every month. Calculate the asset turnover ratio.
A) 1.10 times
B) 1.81 times
C) 1.63 times
D) 1.47 times
6) Barker, Inc. had reported the following details for the year ended December 31, 2019:
Net sales
$24,950,000
Total assets
18,000,000
Total liabilities
11,000,000
The company’s beginning total assets and liabilities were $15,800,000 and $9,900,000, respectively.
Calculate the asset turnover ratio for 2019. (Round your answer to two decimal places.)
A) 2.41 times
B) 1.11 times
C) 1.84 times
D) 1.48 times
7) Dodgers Corp.‘s beginning and ending total assets in the year 2019 were $19,900,000 and $22,100,000,
respectively. Its asset turnover ratio for the year was calculated to be 1.8 times. Calculate the amount of
net sales for the year 2019.
A) $24,960,000
B) $43,100,000
C) $37,800,000
D) $53,500,000
8) During 2018, Landers Corp. had net sales of $17,000,000. The beginning total assets were $8,300,000.
The asset turnover ratio was 1.6 times. Calculate the ending total assets of Landers. (Round any
intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
A) $12,950,000
B) $8,300,000
C) $14,675,000
D) $6,375,000