Problem 1 1) Purchase recipes & secret formulas Licensing, royalty, & stand-stll agreement ‘Operating & broadeast rights Goodwill purchased in a business combination License from government grant Cost of purchasing patent Legal cost in securing patent Cost of purchasing trademark Leasehold rights ‘Total Intangible Assets bem 2 1) Legal cost of acquiring copyright Documentation expense related to copy acquisition ‘Total amount to be initially recognized as copyright 2) Total amount to be lly recognized as copyright ‘Carrying value of the copyright, 1231.11 Problem 3 1) Trademark Customer list Franchise Goodwill ‘Total Intangible Assets 2) Carrying value of intangibles, June 30, 2011 Amortization Trademark £600000/4years x 6/12 Customer list 1125000/3years x 6/12 Franchise '525000/5years x 6/12 Carrying value of intangibles, December 31, 2011 225,000 450,000 168,000 730,000 225,000 262,500 205,500 105,000 375,000 150,000 2,916,000 15,000,000 1,500,000 16,500,000 4/5 13,200,000 600,000 1,125,000 525,000 3,000,000, 5,250,000 75,000 187,500 315,000) 4:935,000 wdProblem 4 1) Initial recognition of license @ Fair Value ‘Add: Directly attributable cost Total 2) Cost of license Less: Amortization 2,325,000/10 years Carrying Value, December 31, 2012 Problem § 1) Downpayment Present Value of Instllment 2,700,000 x 3.60478 Total 2) Cost of Franchise Less: Amortization 11,232,906/20 years 1) Initial recognition of intangible asset: Expenditure after meeting the criteria for recognition a intangible asset 2) Initial Cost Additional capitalizable cost Total Recoverable Value Intangible Asset, December 31, 2012 (lower) 2,250,000, 2,325,000 2,325,000, 232500 772,500 1,500,000 9,732,905 11,232,906 11,232,906 581.545 Tosriget 150,000 3,000,000 3.150.000" —2:850,000, 2,850,000Problem 7 1) Initial Recognition of Patent: 2) Cost of patent, January 2, 2005 Less: Amortization 930,000/20 years Carrying value, December 31, 2005 3) Carrying value, December 31, 2005 Less: Amortization '930,000/20 years x3 years Carrying value, December 31, 2008 ‘Add: acquisition cost of competing patent New carrying value Less: Amortization 1,353,000/16 years Carrying value, December 31, 2009 4) Carrying value, December 31, 2009 Add: Cost of related patent Total Less: Amortization over extended life 2,250,000/17 years x2 Carrying value, December 31, 2011 5) Carrying value, December 31,2011 Total loss from patent write-off 930,000 930,000 46,500 383,500 883,500 139,500 "744,000 609,000 1,353,000 84565, 1368.08 1,268,438 081553, 7,250,000 264,706 7,985,294 1,985,294 is FESEITI andProblem § » 2 3) Legal life Acquired 6 years after registration 01.01.04 01.01.09 Less 5 years 1231.11 Less 3 years Carrying value, December 31, 2012 before amortization Less: Legal fees capitalized 112,509 x 6 75,000 Patent w/ remaning 3 yes life 315,000/14 x6 135,000 Carrying value, December 31, 2012 (6yrs) Patent w/remaning 3 yrs life 135,000 1B Correct amortization 2012 Carrying value, December 31, 2012 (6yrs) 630,000 516, Patent w/ remaning 3 yrs life 135,000 213 Carrying value, December 31,2012 (adjusted) Legal fees capitalized ‘Amortization of legal fees (2009-2011) (112,S00*3/9) Retroactive adjustment to the beginaing retained earnings 210,000 ‘630.000 6 105,000Jem 9 » 2 3 4) 9 Purchase price 8,000,000 Fair market value of net assets 6,500,000 Goodwill ‘Net income, 5 yrs Gain on sale of fixed assets Bonus (150,000*S yrs) Operating income, 5yrs Divided by ‘Average annual operating income Less: Increase in depreciation (4,100,000-3,500,000/6 ‘Average annual future operating income ‘Normal industry earnings (6,500,0009%) Excess earnings ‘Goodwill (195,000*10) Fair market value of net assets Purchase price Goodwill (195,000/12%) Fair market value of net assets Purchase price Purchase price (780,000/10%) Fair market value of net assets Goodwill Goodwill (195,000*6.1446) Fair market value of net assets Purchase priceProblem 10 1) 2 3 4) » Purchase price Fair market value of net assets Goodwill X — (2,000,000*2/8) YY (2,000,000"1.5/8) Z — ,000,0004.5/8) ‘CORRECTION: Change July 1, 2012 0 January 1, 2012 Original annual cash inflows PV factor 9 periods @ 15% ‘Value in use Carrying value of net assets, including goodwill Value in use ‘Total impairment loss Impairment loss against goodwill ‘Total impairment loss for goodwill Balance to be allocated for receivables (1.8/6) for inventories (1.5/6) for PPE (2.7/6) (Carrying value of PPE before impairment Impairment loss on PPE Carrying value of PPE after impairment Balance to be allocated for receivables (1.8/4.5) for PPE (2.7/4.5) Carrying value of PPE before impairment Impairment loss on PPE Carrying value of PPE after impairment 10,000,000 8,000,000 2,000,000, 300,000 375,000 1,125,000 2,830,578 1,125,000 1,105,578 311,673 426,395 767,510 2,700,000 167,510 1,332,490, 1,705,578 682,231 1,023,347