Long-Term Assets II: Investments and Intangibles

What is the proper way for a company to report cryptocurrency holdings on its financial statements?

• a. As cash

• b. As a receivable

• c. As an investment

• d. As an intangible asset.

Which cryptocurrency is the most well-known and widely-held?

• a. Ethereum

• b. Tether

• c. Bitcoin

• d. Litecoin.

The inclusion of goodwill in a company's balance sheet tells us that

• a. It was internally generated because the company has earnings in excess of those of other companies in the industry.

• b. The company purchased it.

• c. The company will be reporting amortization expense for the goodwill.

• d. The company will not be reporting an impairment loss for the goodwill.

A stake in another company's common shares invested using the fair value option will be

• a. Reported as a current asset

• b. Reported as a noncurrent asset

• c. Reported as either a current or noncurrent asset depending on managerial intent.

• d. Reported as a current asset only if it was not previously reported as an equity method investment.

The economic concept of income would require that an investment in the common stock of another entity be

• a. Reported in the balance sheet at historical cost and that only realized gains and losses be reported in earnings.

• b. Reported in the balance sheet at historical cost and that unrealized gains and losses be reported in earnings.

• c. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in earnings.

• d. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in other comprehensive income.

Physical capital maintenance The concept of income necessitates investing in the common shares of another organization.

• a. Reported in the balance sheet at historical cost and that only realized gains and losses be reported in earnings.

• b. Reported in the balance sheet at historical cost and that unrealized gains and losses be reported in earnings.

• c. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in earnings.

• d. Reported in the balance sheet at fair value and that unrealized gains and losses be reported in other comprehensive income.

Goodwill is an intangible asset

• a. That has a definite life and its cost should be amortized over its useful life.

• b. That is recorded when the company has projected earnings in excess of earnings expected for an investment in a similar company in the same industry.

• c. That is reviewed for impairment when circumstances indicate that impairment may have occurred.

• d. That is reviewed annually to determine whether impairment has occurred.

Upon a successful patent defense in court, the litigation expenses are abated.

• a. Should be expensed as incurred because it is a period cost.

• b. Should be added to the cost of the patent and depreciated over the remaining useful life of the patent.

• c. Should be added to the cost of the patent which is then expensed as a period cost.

• d. Has already been expensed so there is no further action to take.

The theoretical justification for expensing research and development (R&D) cost as it is incurred is based on which of the following arguments?

• a. R&D costs provide no future benefits, thus it does not meet the definition of an asset

• b. R&D costs are incurred to generate current period revenue; thus the matching concept requires that it be expensed as incurred.

• c. Whether R&D costs that have been incurred will provide future benefit is uncertain, thus it does not meet the definition of an asset.

• d. Since R&D costs have been incurred during the current period, they meet the definition of an expense.

Depreciation-related losses on intangible assets equal the discrepancy between the asset's

• a. Carrying amount and the expected future net cash flows

• b. Carrying amount and its fair value

• c. Fair value and the expected future net cash flows

• d. Book value and its fair value