CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FRNASLUL ACCOUNTING AND REPORTING _YALDUSIVWALLIUESC cnr | i INTANGIBLE ASSETS 1 Anny eon he flowing se et yarent =] smite soe somo in {| 300.000 tomer list | $00,000 ric | 79000 ith advertising agen promt good 4200 xcs cox oe fava of erful net et of acquired aos 1.000 Excess of cost over fair value of identifiable net assets of acquired subsidiary 4,000,000 ‘erat 0000 Resch io evelopment con | xo0n.00 ‘Watt anon shoul be epotdantage aes? &. 11,.00000 B. 11300000 & 12500000 4. 13,100,000 ey i me Pci mi * pr cer creer at ra ee ee ee Tisaroneraa rom ‘What isthe amount of goodwill if i 1. Excess eamijgs are purchased for $ years? $0000) 6. 4,000,00r ‘5,000,000 \ 4 4,500,000 | 2. Excess earings are capitalized at 25%? | 7,200,000 6,406,000 000,000 4. 3,600,000 3, Annual average eamings are purchased for 3 years? 2 10,800,000 ’. 18,000,000 4,800,000 4. 5,400,000 4, Annual average eamings are capitalized at 25%? 2 1,600,000 '. 3,600,000 4,400,000 4. 2,000,000 5, aces earings are discounted at 12% for 5 years? (The PV ofan ordinary enmity of 1 for $ years at 12% 3.60) ! 2. 12,960,000 i ‘b. 10,800,000 «$160,000 \ & 7200,000 : | 6677' Page 2 3, A parent eniy purchased for P4S,000,000 all of the following outstanding shares of a subsidiary With net assets of P32,000.000, Subsidiary assets and lisbilities on the date of eequiston ere: Carrying amount Fair value Property, plant and equipment 50,000,000 57,500,000 Other assets 5,000,000 ° Assembled workforce 2,000,000 2,500,000 Liabilities 30,000,000 28,000,000 ‘What amount should be reported es goodwill? a. 8,500,000 ’. 6,000,000 ©. 6,500,000 4. 8,000,000 4. nent developed a new machine which it bad pleted, The follwing cots wee incued ia developing and patenting the machine: % Pushuse of special equipment ioe used sll for development ofnew machine 18000 esc res and ge benefits fr engineer ond seats 0.000 Cost of testing prototype 250,000 Legal cost of filing patent 300,000 Fees paid to government patent office | 500,000 Drawings required by patent office to be filed with patent epplication ee Legal fees incurred ina successful defense of patent ‘What amount should be capitalized as cost of patent? 1,200,000 1400,000 1,480,000 3,450,000 peer 5. OnJanuary 1,2016, an entity purchased a patent for P7,140.000. The patent is being amortized over ‘the remaining legal life of #5 years. During 2019, the entity determined thatthe economic benefits ‘of the patent would net las: longer than ten vears from the date of acquisition, What isthe carrying, amount ofthe patent on December 31, 2019? a 4.284,000 b. 43896,000 © $050,000 5,326,000 6 On January 1, 2019, an entity reported patent cost of PI,920,000 and related accumulated sporization of P240,000, The paten: was pursed on January , 2017 at which date the remaining legal life was 16 years On January 1, 2018, th useful life of the patent was determined to be only 8 years from the date of acquisition On January 1.2019, the entity paid P&00,C0O, of which tbree-fourths was fora trademark and one- fourth was for the oer entity's agrees: not to compet fsa 5-year period in the line of business covered by the trademark. The enti’ vonsidzed the life of the wademark indefinite, Moreover, the centtyagred to pay PS0,000 tothe eter eatity as consuling fee each year fr S years payable every January 1, What is the fot carying amount of intangible assets on January 1, 20192 a 22280,000 b. 280.000 1.880.000 1,680,000 2. What isthe emount of iota! expenses for 2019 in relation to intangible assets? a 370,000 b. 320,000 ©. 470,000 4. 280,000 6677Page 3 7. On January 1, 2019, an entity acquired a trderaark for P3,000,000. The trademark bas eight years ‘remaining in'the legal life. It is anticipated that the trademark will be renewed in the future indefinitely without problem. On December 31, 2019, the trademark is assessed for impairment. Because ofa decline in economy, the trademark is expected to generate cash lows of just P120,000 enmually, The useful life of the tademurk still extends beyond the foreseeable horizon. The propriate discount rate is 6%. What amount should be recognized as impairment loss on trademark for the current year? 1,000,000 b. 2,000,000 3,000,000 a. 0 8. An catty incured the following research and developments costs inthe curent year: Materials sed in escarch and development projects 400,000 Equipment acquired that will have eltemate future we in fotare research and development projects 2,000,000 Depreciation on above equipment 500,000 Personnel costs of persons involved in research end developinent projects 1,000,000 Consulting fees paid to outsiders for research and development projects oo Indirect costs reasonably allocable to research and development projects, ‘What amount of research and development costs should be expensed in the current year? 1,500,000 ». 1,700,000 ‘e. 2,200,000 4. 3,500,000 9, Earth Company incurred the following costs during the current year: Laboratory research aimed at discovery of new knowledge 750,000 Design of tools, jigs, molds and dies involving new technology 400,000 Quality control during commercial production including routine testing 350,000 Equipment acquired two years ago, having an estimated useful life of five years with no residual value used in Various R and D projects 1,500,000 "250,000 Research and development serves performed by Star Corapany for Earth Company [Research and development services performed by Earth Company for Moon Company 200,000 ‘What amount of research and development expense should be reported in the current year? = 2,900,000 . 1,700,000 1,900,000 4. 2/050,000 10, An entity, a major winery, begins construction of a new facility in Mindanao. The following costs, axe incured in conjunction with te start-up activities of the new facility: Production equipment 8,150,000 “Travel costs of salaried employees "400,000 License fees 140,000 ‘Training of local employees for production and maintenance operations 1,200,000, Advertising costs 850,000 ‘What portion of the organization costs should be expensed? a 9,750,000 '. 1,600,000 ©. 1,390,000 a 0 END 6677