2014 Vol 1 Ch 6 Answers

Chapter 6 - Intangible Assets CHAPTER 6 INTANGIBLE ASSETS PROBLEMS 6-1.

(Daydream Corporation) a. Expense, cost of internally developed publishing title is not allowed to be capitalized. b. Intangible c. Expense d. Intangible e. Intangible f. Prepaid expense g. With alternative use, PPE; otherwise, unrecoverable cost, R and D expense h. Charged to RE i. Expense j. Intangible k. Intangible l. Expense m. Expense, copyright shall be written off in profit or loss n. Expense o. Expense p. PPE q. Expense r. Expense

6-2.

(Amsterdam Enterprises, Inc.) a. Special equipment (600,000 – 460,000) Research salaries Costs of testing prototype R & D Expense

P140,000 51,300 70,800 P262,100

b.

P

c.

d.

6-3.

Fees paid to Phil. Patent Office Drawings required by the patent office Legal costs of filing patent Patent cost, January 1, 2010 Less amortization of patent for years 2010 and 2011 (59,700/ 10) x 2 yrs. Patent carrying value, December 31, 2011

7,500 14,100 38,100 P 59,700 11,940 P 47,760

Patent carrying value at December 31, 2012 59,700 x 7/10 Remaining estimated useful life at January 1, 2013 Amortization expense for year 2013

P 41,790 ÷ 5 P 8,358

Carrying value, January 1, 2013 Less amortization expense for 2013 Carrying value, December 31, 2013

P41,790 8,358 P33,432

(May Company) Patents Cost Less accumulated amortization 36,000 + (156,000 ÷ 8)

P192,000 55,500

52

P 136,500

Chapter 6 - Intangible Assets

6-4.

License Cost (100 x 600 x 2/3) Less accumulated amortization (40,000/4) Trademark Cost (100 x 600 x 1/3) Less accumulated amortization (20,000/4) Goodwill (12M – 9M) Total intangible assets (July, Inc.)

P 40,000 10,000 P 20,000 5,000

30,000

15,000 3,000,000 P3,181,500

2005

Jan. 3

Patents Cash

196,000 196,000

2005-2008

Dec. 31

Amortization Expense - Patents Accumulated Amortization-Patents 196,000 / 10

19,600

Jan. 1

Legal Fees Cash

28,000

Dec. 31

Amortization Expense Accumulated Amortization-Patents

19,600

Patents Cash

60,000

Amortization Expense Accumulated Amortization-Patents 196,000 – (19,600 x 5) = 98,000 (98,000 + 60,000) / 10 = 15,800

15,800

19,600

2009

28,000

19,600

2010

Jan. 1

2010-2012 Dec. 31

60,000

15,800

2013

July 1

1

6-5.

Amortization Expense Accumulated Amortization-Patents 15,800 x 6/12 = 7,900

7,900

Loss from Write off of Patents Accumulated Amortization-Patents Patents 196,000 + 60,000 = 256,000 98,000 + (15,800 x 3.5 yrs) = 153,300

(ToGo Company) Carrying value Recoverable value 150,000/10% = 1,500,000 x 80% 300,000/10% = 3,000,000 x 20% Impairment loss

102,700 153,300 256,000

P4,000,000 P1,200,000 600,000

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7,900

1,800,000 P2,200,000

Chapter 6 - Intangible Assets 6-6.

(Boston Company) a. Patent cost Estimated useful life Amortization per year Amortization expense for 2010 (100,000 x 6/12) b.

Carrying amount, December 31, 2011 (500,000 – 150,000) Estimated recoverable amount Impairment loss at December 31, 2011

P350,000 150,000 P200,000

c.

Written down value of patent at December 31, 2011 Less amortization for 2012 150,000 / 3 Carrying amount at December 31, 2012

P150,000

Sound value at January 1, 2013 Carrying amount at December 31, 2012 Increase in value Impairment loss Recovery of previous impairment loss through lower amortization (100,000 – 50,000) Revaluation surplus in 2013

P600,000 100,000 P500,000

d.

6-7.

P500,000 ÷ 5 yrs. P100,000 P 50,000

(Summer Company) 2010 R & D Expense Cash

50,000 P100,000

P200,000 50,000

150,000 P350,000

500,000

500,000

2011

Jan. 1

Dec. 31

Patents Cash

120,000 120,000

Amortization Expense Accumulated Amortization-Patents

12,000

12,000

2012

Jan. 1 2012-2013

Dec. 31

Patents Cash

1,200,000 1,200,000

Amortization Expense Accumulated Amortization-Patents (120,000-12,000) + 1,200,000 = 1,308,000 1,308,000/15 = 87,200

87,200 87,200

2013

Dec. 31

6-8.

Loss from Write down of Patents Accumulated Amortization Patents

(April Company)

54

1,133,600 186,400 1,320,000

Chapter 6 - Intangible Assets Laboratory research Modification of formulation Testing Searching for application Depreciation of equipment (280,000/5) R & D costs for 2013 6-9.

P 68,000 26,000 24,000 19,000 56,000 P193,000

(Autumn Company) a. 2013 Franchise Cash Dec. 31

31

b. Dec. 31

6,250,000 6,250,000

Franchise Fee Expense (5% x 10,000,000) Cash /Accrued Expenses

500,000

Amortization Expense Accumulated Amortization-Franchise 6,250,000/10 = 625,000; 625,000 x 1/2

312,500

Amortization Expense Accumulated Amortization-Patents 750,000 x 9.5/10 = 712,500; 712,500 / 5

142,500

500,000

312,500

142,500

c. R & D Expense 2,300,000 Equipment 1,000,000 Accumulated Depreciation-Equipment Cash R&D=200,000+1,400,000+600,000+100,000= 2,300,000 (1,000,000 / 5) x ½ = 100,000 6-10.

(Global Computer Corporation) a. R & D Expense Software Costs Cash b.

6-11.

800,000 500,000

Amortization Expense Accumulated Amortization-Software Costs 500,000 / 4 years = 125,000 500,000 x 1M/5 M= 100,000

(Sun Company) a. Downpayment Present value of future payments 300,000 x 2.4869 Total cost b.

125,000

746,070 P1,246,070

P 124,607

55

1,300,000

125,000

P 500,000

Amortization Expense for 2013 1,246,070 / 10yrs

100,000 3,200,000

Chapter 6 - Intangible Assets c. 2013 Jan. 1

Dec. 31

31

2014 Jan. 1

6-12.

1,246,070 153,930 500,000 900,000

Interest Expense Discount on Notes Payable 10% x 746,070 = 74,607

74,607

Amortization Expense Accumulated Amortization-Franchise

89,738

74,067

Notes Payable Cash

300,000

Trade Receivables Inventory Property, Plant and Equipment Goodwill Current Liabilities Noncurrent Liabilities Cash

P7,000,000 6,240,000 P 760,000

1,000,000 1,700,000 5,900,000 760,000 760,000 1,600,000 7,000,000

(Bagong Silangan Company) a. Recoverable amount of the CGU Carrying amount of the CGU Impairment of CGU

P13,100,000 13,400,000 P 300,000

Impairment Loss Goodwill b.

89,738

300,000

(Winter Company) a. Cash purchase price Fair value of net assets (1,000,000 + 1,700,000 + 5,900,000 – 2.360,000) Goodwill

b.

6-13.

Franchise Discount on Notes Payable Cash Notes Payable

300,000 300,000

Recoverable amount of the CGU Carrying amount of the CGU Impairment loss Reported goodwill per ledger Decrease in value of identifiable noncurrent assets Impairment loss Goodwill Land (5/13 x 600,000)

P12,400,000 13,400,000 P 1,000,000 400,000 P 600,000 1,000,000

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400,000 230,769

Chapter 6 - Intangible Assets Accumulated depreciation – Building (6.2/13 x 600,000) Accumulated amortization – Patents (1/13 x 600,000) Accumulated amortization – Trademarks (.8/13 x 600,000)

286,154 46,154 36,923

MULTIPLE CHOICE QUESTIONS Theory MC1 D MC2 D MC3 C MC4 B MC5 B

MC6 MC7 MC8 MC9 MC10

Problems MC21 MC22 MC23 MC24 MC25

D C C B B

MC26

B

MC27 MC28 MC29 MC30 MC31 MC32 MC33 MC34 MC35 MC36 MC37 MC38 MC39 MC40 MC41 MC42 MC43 MC44 MC45 MC46

C C B A C C A A C B C D A B B C C A C B

A C D B D

MC11 MC12 MC13 MC14 MC15

B D B D C

MC16 MC17 MC18 MC19 MC20

B A B D C

244,000 + 100,000 = 344,000 Initial franchise fee of P1,000,000 750,000 + 150,000 = 900,000 200,000 + (100,000 x 2.91) = 491,000 1,200,000 x 2/50 = 48,000; (750,000 ÷ 10) x 2/12 = 12,500 60,000 x 2/12 = 10,000; 48,000 + 12,500 + 10,000 = 70,500 125,000 ÷ 10 = 12,500; 272,500 ÷ 5 = 54,500 x ½ = 27,250 656,200 ÷ 17 = 38,600; 12,500 + 27,250 + 38,600 = 78,350 340,000 ÷ 10 = 34,000 x ½ = 17,000 340,000 – 17,000 – 34,000 = 289,000 289,000 ÷ 5 = 57,800 P0 68,000 + 24,000 + 6,000 + 19,000 = 117,000 152,000 ÷ 8 = 19,000 1,440,000 x 1.5/10 = 216,000 40,000 + 5,000 = 45,000 900,000 x 7/10 = 630,000 210,000 + 300,000 + 400,000 + 220,000 + 260,000 = 1,390,000 1,500,000 ÷ 30 = 50,000 480,000 ÷ 10 = 48,000 (480,000 x 5/10) + 200,000 = 440,000; 440,000 ÷ 10 = 44,000 440,000 – (44,000 x 3.5 yrs) = 286,000 270,000 x 6/10 = 162,000; 162,000 ÷ 3 = 54,000; 162,000 – 54,000 = 108,000 1/5=20%; Depreciation is the higher rate, 20%; thus carrying amount is 80% 25% X 6M = 1,500,000 1,500,000 ÷ 5,000,000 = 30%; 30% x 2,500,000 = 750,000 115,000,000 – 52,500,000 = 62,500,000; 70,000,000 – 62,500,000 = 7,500,000 1,000,000

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