Question 19 1 pts ABC Company paid $500,000 for a Dairy Queen store whose assets

Question

Question 19 1 pts ABC Company paid $500,000 for a Dairy Queen store whose assets were valued at $450,000. Which of the following statements is true? ABC should record the Store on its Balance Sheet at a cost of $5oo,o0O ABC needs to record Goodwill of $50,000 as an intangible asset on its Balance Sheet. ABC should record a liability of $50,000 on its Balance Sheet. ABC should record a Loss on Purchase of $50,0OO in its Income Statement. Question 21 1 pts Which of the following is true regarding intangible assets? They are expensed over the periods benefited and this is caled depletion. They are normally expensed using the straight-line method They normally have an Accumulated Amortization account associated with them They should be expensed over the legal life even when the useful life is less than the legal life Question 22 1 pts Which of the following statements is FALSE? Held-to-maturity securities include both stocks and bonds that the purchaser intends to hold for longer than a year Available for sale securities are stocks and bonds that a company buys with the intention of selling at some point in the future - but not in the near-term. Trading securities are short-term investments in both stocks and bonds bought with the intention of selling them in the near future All types of investment accounts are adjusted to fair value at the end of each accounting period

Explanation / Answer

Answer

19.B

ABC need to record goodwill of $50000 as an intangible asset on its balance sheet.

Goodwill is an intangible asset that arises when one company purchases another for a premium value. The value of a company's brand name, solid customer base, good customer relations, good employee relations ,and any patents or proprietary technology represent goodwill.

21.C

Accumulated amortization is the cumulative amount of all amortization expense that has so far been charged against an intangible asset. The concept can also be intended to apply to all amortization that has been charged to-date against a group of intangible assets. Amortization is used to indicate the gradual consumption of an intangible asset over time. Amortization is nearly always calculated on a straight-line basis. The typical amortization entry is a debit to amortization expense and a credit to the accumulated amortization account.

22.

D.

All types of investment accounts are adjusted to fair value at the end of each accounting period.

Held to maturity:

            Do not adjust to fair market value.  
            Adjust the cost of the bond investment each period for interest using
             the amortization schedule, as interest is earned and received

    Trading Securities:

            Adjust the investment to fair market value at the end of each period
              if fair market value is reliable – there is a bid ask quote
            The change in fair market value is reported on the income statement
              under “other” revenues and expenses – “unrealized gain/loss” account
            Record dividends received as dividend income

    Available for Sale:

            Adjust the investment to fair market value at the end of the period
              if fair market value is reliable – there is a bid ask quote
            The change in fair market value is reported on the balance sheet as
              part of owner’s equity – accumulated gain/loss – an owner’s equity account
            Record dividends received as dividend income

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