Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP

1. Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP. GAAP defines a carrying amount as "not recoverable" if
   A. it is less valuable than its current fair value.
   B.it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal.
   C. it is greater than the sum of the cash flows expected from the asset's use and disposal.
   D. it is less valuable than its current carrying value.

B.it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal.

2. Ignore taxes for this problem. Assume an acquisition was made using the acquisition method. The buyer established a $10 million acquisition reserve for unsettled lawsuit related to the target company. In the event that the lawsuit is ultimately settled for $8 million, then:
   A. the buyer would make no adjustments to the reserve
   B. The buyer would charge $8 million to the reserve. Goodwill would be adjusted by $2 million with no impact on net income.
   C. Net income for the year would be decreased by $8 million.
   D. The buyer would charge $8 million to the reserve. Net income for the year would be increased by $2 million.

The buyer would charge $8 million to the reserve. Net income for the year would be increased by $2 million.

3. The need to incur costs to reclaim a natural resource is an example of a(n)
   A. asset retirement obligation
   B. development cost
   C. depletion cost
   D. exploration cost

A. asset retirement obligation

4. All of the following statements are true regarding accounting for software development costs except:
   A. All of the following statements are true regarding accounting for software development costs except:
   B. The interpretation of the meaning of technological feasibility has created diversity in the practice of accounting for software development costs.
   C. Firms must expense as incurred all costs incurred internally in developing computer software until such development achieves the technological feasibility of a product.
   D. Firms must capitalize as incurred all costs incurred internally in developing computer software.

D. Firms must capitalize as incurred all costs incurred internally in developing computer software.

5. All of the following are typically costs that fail the future benefits test of long-lived operating assets except:
   A. costs of equipment used in production
   B. costs related to marketing
   C. costs related to brand building activities
   D. costs related to research and development

A. costs of equipment used in production

6. A key characteristic of asset measurement is best described as:
   A. fair value at the acquisition date
   B. disposal cost less depreciation
   C. fair value less depreciation
   D. average value based on all assets held by the company

A. fair value at the acquisition date

7. Which one of the following is an example of the expected benefit approach for valuing long-lived assets?
   A. current replacement value
   B. current cost
   C. historical cost
   D. discounted present value

D. discounted present value

8. Unrealized holding gains or losses which are immediately recognized in the income statement are from securities classified as
   A. equity
   B. held to maturity
   C. available for sale
   D. trading

D. trading

9. All of the following are types of intercorporate investments in capital stock except:
   A. minority, active
   B. majority, passive
   C. majority active
   D. minority passive

B. majority passive

10. When a foreign entity has the U.S. dollar as its functional currency, it uses which exchange rate to translate monetary assets and liabilities?
    A. end of the period exchange rate
    B. the exchange rate based on the date the asset of liability was obtained
    C. the average exchange rate during the period
    D. the historical exchange rate

A. end of the period exchange rate