CH 6 Answers Vol 1 Finacc

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
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
Amortization Expense
Accumulated Amortization-Patents
196,000 / 10
19,600
Legal Fees
Cash
28,000
19,600
Patents
60,000
19,600
2005
Jan. 1
28,000
2005
Dec. 31
19,600
2006
Jan. 1
42

Cash
60,000
2006-2008
Dec. 31
15,800
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
Loss from Writedown of Patents

Patents
102,700
153,300
256,000
196,000 + 60,000 = 256,000

98,000 + (15,800 x 3.5 yrs) = 153,300
6-4
7,900
(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
50,000
P500,000
P350,000
500,000
500,000
2007
Jan. 1
Patents
Cash
120,000
120,000
43

Dec. 31
12,000
12,000
2008
Jan. 1
Patents
1,200,00
0
Cash
1,200,00
0
2008-2009
Dec. 31
(120,000-12,000) + 1,200,000 =
1,308,000
1,308,000/15 = 87,200
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
1,133,36
0
186,400
1,320,00
0
P 68,000
26,000
19,000
P169,000
6,250,00
0
Cash
Dec. 31
Franchise Fee Expense

Cash
500,000
Dec.
Accumulated Amortization-Franchise
6,250,000/10 = 625,000; 625,000 x 1/2
312,500
750,000 x 9.5/10 = 712,500; 712,500 / 5
142,500
31
b.
2009
Dec. 31
c.
2009
R & D Expense
Equipment
Accumulated Depreciation-Equipment
Cash
R&D=200,000+1,400,000+600,000+100,000=
2,300,000
44
56,000
6,250,00
0
500,000
312,500
142,500
2,300,00
0
1,000,00
0
100,000
3,200,00
0

(1,000,000 / 5) x = 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
760,000
1,600,00
0
7,000,00
0
Cash
6-9
(Global Computer Corporation)

a.
R & D Expense
Software
Cash
b.
6-10
800,000
500,000
1,300,00
0
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
175,000
175,000
P400,000
497,380
P897,380
P179,476
c.
2009
Jan. 1
Dec. 31
31
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
49,738
Accumulated Amortization-Franchise
179,476
Notes Payable
Cash
200,000
179,476
2010
Jan. 1
200,000
45
MULTIPLE CHOICE QUESTIONS

Theory
MC1 c
MC6
MC2
MC7
MC3
MC8
MC4
MC9
MC5
MC1
0
Problems
MC21
d
MC22
a
MC23
c
MC24
b
MC25
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 = 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 = 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
MC41
MC42
b
b
MC43
MC44
c
d
MC45
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

CH 6 Answers Vol 1 Finacc

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Chapter 6 - Intangible Assets

Fees paid to Phil. Patent Office

Chapter 6 - Intangible Assets

196,000 (19,600 x 5) = 98,000

Loss from Writedown of Patents

196,000 + 60,000 = 256,000

Chapter 6 - Intangible Assets

Loss from Writedown of Patents

Franchise Fee Expense

Chapter 6 - Intangible Assets

(Global Computer Corporation)

Amortization Expense for 2006

Chapter 6 - Intangible Assets

MULTIPLE CHOICE QUESTIONS

244,000 + 100,000 = 344,000

Chapter 6 - Intangible Assets

440,000 (44,000 x 3.5 yrs) = 286,000

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

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