EXAM about INTANGIBLE ASSETS 2

General Rule: Read the problems carefully and answer the following with solutions wisely. (10 points)

1. Gandhi Company purchased a patent on January 1, 2019 for P428,400. The patent was being amortized
over its remaining legal life of 15 years expiring on January 1, 2034. On January 1, 2022, Gandhi
determined that the economic benefits of the patent would not last longer than 10 years from the date of
acquisition. What amount should be reported in the balance sheet as patent, net of accumulated
amortization at December 31, 2025?
A. P146,880
B. P195,840
C. P244,800
D. P302,400

2. On January 2, 2019, Hanna Company paid P500,000 to acquire a patent with a remaining economic
useful life of 15 years. Hanna Company expects to use the patent for 5 years and intends to sell it after 5
years. Inno Company has committed to buy the patent for 40% of the cost to Hanna Company. In its
December 31, 2019, what amount of patent amortization should Hanna Company report in its profit or
loss?
A. P40,000
B. P60,000
C. P100,000
D. P200,000

3. Javier Company has a broadcasting license that expires in 5 years. As of January 1, 2019, the license has
a carrying amount of P1,800,000. The license is renewable and has already been renewed twice in the
past. During the current year 2019, the broadcasting authority has decided that in the future it will auction
the licenses when they came up for renewal. As a result of this development, the company’s renewal
option is no longer assured. The license has a remaining life of three years as of January 1, 2019. In the
December 31, 2019 statement of financial position, how much should be reported as the carrying value of
the broadcasting license?
A. None
B. P1,200,000
C. P1,600,000
D. P2,000,000

4. Kiki Company incurred P298,350 of research and development cost to develop a product for which a
patent was granted on January 2, 2019. Legal fees and other costs associated with registration of the
patent totaled P109,200. On January 2, 2025, Kiki Company paid P90,000 for legal fees for the litigation
put up against the patent. The patent has a useful life of 20 years. The final verdict was known on July 1,
2025 in favor of Kiki Company. What total amount of expense Kiki Company should report in its 2025
profit or loss related to the patent?
A. P5,460
B. P90,000
C. P95,460
D. P166,440

5. The R&D division of Lola Company undertakes both research and development activities of the
company. Its current development project on a prototype is near completion. The cost identified in this
project consists of the following:
Cost of materials used P5,000,000
Salaries of consultants for the projects 2,000,000
Fees to register trade design 50,000
Amortization of patent used in the project 100,000
Selling and administrative overheads allocated 1,000,000
 Initial operating losses 500,000
Training costs to operate the asset 100,000
Total P8,750,000

The other costs that relate to this project are the salaries of scientists and technicians (P1,200,000) and
depreciation of equipment used in the research and development activities (P900,000). Management estimates that
about one third of these costs relate to the development project. What amount of development costs that should be
capitalized?
A. P7,150,000
B. P7,850,000
C. P8,250,000
D. P8,750,000