Ch 6 Answers Vol 1 finacc

CHAPTER 6 INTANGIBLE ASSETS PROBLEMS 6-1

(Amsterdam Enterprises) a. Special equipment Research salaries Costs of testing prototype R & D Expense b.

c.

Fees paid to Phil. Patent Office Drawings required by the patent office Legal costs of filing patent Patent cost, January 1, 2004 Less amortization of patent for years 2006 and 2007 (59,700/ 17) x 2 yrs. Patent carrying value, December 31, 2007 Patent carrying value at December 31, 2008 59,700 x 14/17 Remaining estimated useful life at January 1, 2009 Amortization expense for year 2009

P546,000 51,300 70,800 P668,100 P 38,100 P 59,700

7,500 14,100

7,024 P 52,676 P 49,165 ÷ 5 P 9,833

6-2

(May Company) Patents Cost P192,000 Less accumulated amortization 36,000 + (156,000 ÷ 8) 55,500 P 136,500 License Cost (80 x 600 x 2/3) P 32,000 Less accumulated amortization (32,000/4) 8,000 24,000 Trademark Cost (80 x 600 x 1/3) P 16,000 Less accumulated amortization (16,000/4) 4,000 12,000 Goodwill (12M – 8M) 4,000,000 Total intangible assets P4,172,500

6-3

(July, Inc.) 2001

Jan. 3 2001-2004

Dec. 31

Patents Cash

196,000 196,000

Amortization Expense Accumulated Amortization-Patents 196,000 / 10

19,600

Legal Fees Cash

28,000

Amortization Expense Accumulated Amortization-Patents

19,600

19,600

2005

Jan. 1

28,000

2005

Dec. 31 2006

19,600

Chapter 6 - Intangible Assets Jan. 1 2006-2008

Dec. 31

Patents Cash

60,000

Amortization Expense Accumulated Amortization-Patents

15,800

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

7,900

60,000

15,800

196,000 – (19,600 x 5) = 98,000 (98,000 + 60,000) / 10 = 15,800

2009

July 1

1

Loss from Writedown of Patents Accumulated Amortization-Patents Patents

7,900 102,700 153,300 256,000

196,000 + 60,000 = 256,000 98,000 + (15,800 x 3.5 yrs) = 153,300

6-4

(Boston Company) a. Patent cost Estimated useful life Amortization per year P100,000 Amortization expense for 2006 (100,000 x 6/12)

P500,000 ÷ 5 yrs. P 50,000

b. Carrying amount, December 31, 2007 (500,000 – 150,000) P350,000 Estimated market value 150,000 Impairment loss at December 31, 2007 P200,000 c. Written down value of patent at December 31, 2007 P150,000 Less depreciation for 2008 150,000 / 3 = 50,000 Carrying amount at December 31, 2008 P100,000 d. Sound value at January 1, 2009 P600,000 Carrying amount at December 31, 2008 100,000 Increase in value Recovery of previous impairment loss through lower amortization = 200,000 / 3 200,000 Revaluation surplus in 2009 6-5

(Summer Company) 2006 R & D Expense Cash 2007

Jan. 1

50,000

P500,000

P350,000 500,000 500,000

Patents

120,000

43

Chapter 6 - Intangible Assets Cash Dec. 31

120,000

Amortization Expense Accumulated Amortization-Patents

12,000

12,000

2008

Jan. 1

Patents

1,200,00 0

Cash

1,200,00 0

2008-2009

Dec. 31

2009

Dec. 31

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

6-6

6-7

(April Company) Laboratory research Modification of formulation Searching for application Depreciation of equipment (280,000/5) R & D costs for 2009 (Autumn Company) a. 2009 Franchise

87,200

1,133,36 0 186,400 1,320,00 0 P 68,000 26,000 19,000

6,250,00 0 6,250,00 0

Dec. 31

Franchise Fee Expense Cash

500,000

Dec.

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

b. 2009 Dec. 31 c. 2009

56,000

P169,000

Cash

31

87,200

R & D Expense

500,000 312,500

142,500 2,300,00 0 1,000,00 0

Equipment Accumulated Depreciation-Equipment Cash

44

100,000 3,200,00 0

Chapter 6 - Intangible Assets R&D=200,000+1,400,000+600,000+100,000= 2,300,000 (1,000,000 / 5) x ½ = 100,000

6-8

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

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

P6,240,000 7,000,000 P 760,000 1,000,00 0 1,700,00 0 5,900,00 0 760,000

Cash 6-9

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

6-10

800,000 500,000

Amortization Expense Accumulated Amortization-Software 500,000 x 1.4M/4M = 1,300,000

(Sun Company) a. Downpayment Present value of future payments 200,000 x 2.4869 Total cost b.

Amortization Expense for 2006 897,380 / 5yrs

c.

760,000 1,600,00 0 7,000,00 0

1,300,00 0

175,000 175,000

P400,000 497,380 P897,380 P179,476

2009

Jan. 1

Dec. 31

31 2010

Jan. 1

Franchise Discount on Notes Payable Cash Notes Payable

897,380 102,620 400,000 600,000

Interest Expense Discount on Notes Payable 10% x 497,380 = 57,600

49,738

Amortization Expense Accumulated Amortization-Franchise

179,476

Notes Payable Cash

200,000

49,738

179,476

200,000

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Chapter 6 - Intangible Assets

MULTIPLE CHOICE QUESTIONS Theory MC1 c

MC6

d

MC2

c

MC7

b

MC3

d

MC8

d

MC4

a

MC9

b

MC5

b

MC1 0

c

Problems MC21 d MC22 a MC23 c MC24 b MC25

b

MC26 MC27 MC28 MC29 MC30 MC31 MC32 MC33 MC34 MC35 MC36 MC37 MC38

b c c b a c c a d c b c b

MC1 1 MC1 2 MC1 3 MC1 4 MC1 5

d a d b a

MC1 6 MC1 7 MC1 8 MC1 9 MC2 0

b c c d c

244,000 + 100,000 = 344,000 P0 750,000 + 150,000 = 900,000 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 = 78,350 200,000 + (100,000 x 2.91) = 491,000 340,000 ÷ 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 = 2,080,000 1,500,000 ÷ 30 = 50,000 1,000,000

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Chapter 6 - Intangible Assets MC39 MC40 MC41 MC42

d a b b

MC43 MC44

c d

MC45

a

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 1,150,000 – 525,000 = 625,000; 700,000 – 625,000 = 75,000 1/5=20%; Depreciation is the higher rate which is 30%; thus carrying amount is 70%

1,500,000 ÷ 5,000,000 = 30%; 30% x 2,500,000 = 750,000

47