Intermediate accounting by robles empleoch 6 answers

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

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

c.

P546,000
51,300
70,800
P668,100

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

P

7,500
14,100

38,100
P 59,700
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

Patents
Cash

196,000

196,000

2001-2004

Dec. 31

2005

Jan. 1
2005

Dec. 31

Amortization Expense
Accumulated Amortization-Patents
196,000 / 10

19,600

Legal Fees
Cash

28,000

Amortization Expense
Accumulated Amortization-Patents

19,600

Patents

60,000

28,000
19,600

2006

Jan. 1

19,600

42


Chapter 6 - Intangible Assets
Cash

60,000

2006-2008

Dec. 31

Amortization Expense
Accumulated Amortization-Patents

15,800

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

7,900

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

15,800

2009

July 1

1

Loss from Writedown of Patents
Accumulated Amortization-Patents
Patents

102,700
153,300

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)

7,900

256,000

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

50,000

P500,000

P350,000
500,000

500,000

2007

Jan. 1

Patents
Cash

120,000

43

120,000


Chapter 6 - Intangible Assets
Dec. 31
2008

Jan. 1

Amortization Expense
Accumulated Amortization-Patents
Patents

Dec. 31

12,000
1,200,00
0

Cash
2008-2009

12,000

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

1,200,00
0

87,200
87,200

2009

Dec. 31

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

Dec.

31

b.
2009
Dec. 31
c.
2009

1,320,00
0

P 68,000
26,000
19,000
P169,000

6,250,00
0

Cash
Dec. 31

1,133,36
0
186,400

Franchise Fee Expense
Cash

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

56,000

6,250,00
0
500,000

R & D Expense
Equipment
Accumulated Depreciation-Equipment
Cash
R&D=200,000+1,400,000+600,000+100,000=
2,300,000

44

312,500

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

100,000
3,200,00
0


Chapter 6 - Intangible Assets
(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

45


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

MC39
MC40

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

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
480,000 ÷ 10 = 48,000
(480,000 x 5/10) + 200,000 = 440,000; 440,000 ÷ 10 = 44,000

46


Chapter 6 - Intangible Assets
MC41
MC42

b
b

MC43
MC44

c

d

MC45

a

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