Problem 31-7 (C)

Acquisition Cost (150,000 x 50) 7,500,000

Fair value of net assets acquired 6,800,000
Goodwill 700,000

Carrying amount of net assets 6,000,000

Excess fair value of PPE 800,000
Fair value of net assets 6,800,000

Problem 31-8 (C)

Accounts Receivable 2,000,000
Inventory 500,000
Equipment 500,000
Short-term payable - 2,000,000
Net assets at fair value 1,000,000

Acquisition cost 5,000,000

Net assets at fair value - 1,000,000
Goodwill 4,000,000

Problem 31-9 (C)

Acquisition Cost (200,000 x 30) 6,000,000
Fair value of net assets acquired - 5,400,000
Goodwill 600,000

Carrying amount of net assets 5,000,000

Excess fair value of identifiable assets 400,000
Fair value of net assets 5,400,000

Problem 31-10 (A)

Carrying amount of net assets 3,200,000
Undervaluation of PPE 750,000
Overvaluation of other assets - 500,000
Overvaluation of long-term debt 200,000
Fair value of net assets 3,650,000

Acquisition Cost 4,000,000

Fair value of net assets acquired - 3,650,000
Goodwill 350,000

Problem 31-11
1. D
2. C
3. D
4. D
5. C
6. B
7. D
8. A

Problem 31-12
1. D
2. D
3. C
4. C
5. D

Problem 31-13
1. C
2. B
3. B
4. D
5. A
6. D
7. A
8. B
9. D
10. A

Problem 31-14
1. A
2. C
3. D
4. B
5. A
Problem 32-15 (C)
Cost 1/1/2015 6,000,000
Accumulated Depreciation (6,000,000/15x5)
2,000,000

Carrying amount - 1/1/2020 4,000,000

Amortization for 2020 (4,000,000/5) 800,000

Problem 32-16 (A)

Cost of competing patent 4,500,000
Remaining useful life 10 years
Amortization for 2020 (4,500,000/10) 450,000

Problem 32-17 (D)

Acquisition Cost - January 1, 2017 450,000
Amortization Cost (450,000/15x3) -90,000
Carrying Amount - January 1, 2020 360,000

Sale Price 750,000

Carrying amount 360,000
Gain on sale 390,000

Problem 32-18 (C)

Cost 1/1/2018 5,400,000
Amortization Cost (5,400,000/6x2) -1,800,000
Carrying Amount - January 1, 2020 3,600,000

Amortization for 2020 (3,600,000/20) 180,000

Problem 32-19 (A)

Design Costs 1,500,000
Legal fees of regestering trademark 150,000
Registration fee with patent office 50,000
Total Cost of trademark 1,700,000

Problem 32-20 (B)

Purchase price 1,000,000
Nonrefundable value added tax 50,000
Legal cost incurred to register new trademark 1,050,000

Cost of trademark 1,155,000

Problem 32-21
Question 1 (C)
Trademark 2,000,000
Value in use (120,000 * 8%) 1,500,000
Impairement Loss 500,000

Question 2 (D)
Patent 6,000,000
Amortization for 2020 (6,000,000/5) 1,200,000
Carrying amount -12/31/2020 4,800,000
Value in use (1,000,000 x 3.31) 3,310,000
Impairement Loss 1,490,000

Problem 32-22 (C)

Downpayment 2,000,000
PV of annual payment for 4 years 2,910,000
Cost of franchise 4,910,000

Problem 32-23 (B)

Original Lease 12 years
Extension 8 years
Total Life 20 years
Less: Years expired 2 years
Remaining Life 18 years

Life of improvement 15 years

Leasehold Improvement 540,000

Less: Depreciation -36,000
Carrying Amount 504,000

Problem 32-24 (B)

150,000
Accumulated Depreciation - 12/31/2020 (1,200,000/8)

Problem 32-25 (D)

Travel Costs of salaried employees 400,000
Training of local employees 1,200,000
Total start-up cost to be expensed 1,600,000

Problem 32-26
1. D
2. D
3. A
4. D
5. D
Problem 32-27
1. A
2. C
3. C
4. C
5. D

Problem 32-28
1. C
2. D
3. B
4. D
5. D
Problem 33-1
Question 1 (A)
Cost of patent - legal and registration only 1,000,000

Question 2 (B)
Development cost after technological feasibility 5,000,000
Additional dev. cost up to full manufacturing stage 2,000,000
Development cost capitalized 7,000,000

Question 3 (A)
Amortization of patent (1,000,000/5) 200,000
Amortization of dev. cost 7,000,000/5) 1,400,000
Total Amortization for 2021 1,600,000

Problem 33-2 (A)

Salaries of engineers, consultants and technicians 400,000
Cost of developing the duct and producing the test model 500,000
Additional cost for revising the ducting process 600,000
Cost of developing the first model or prototype 100,000
R and D expense 1,600,000

Problem 33-3 (D)

Research and development services performed by another entity 150,000

Design, construction and testing of preproduction prototype and
model 200,000

Testing in search for new product or process alternative 175,000

Total R and D expense 525,000

Problem 33-4 (A)

Depreciation of equipment 20,000
Equipment purchased for current projects 200,000
R and D salaries for current projects 400,000
Material and labor cost for prototype product 600,000
R and D expense 1,220,000

Problem 33-5 (B)

Depreciation 300,000
Salaries 700,000
Indirect Cost Allocated 200,000
Materials 180,000
Total Research and dev. expense 1,380,000
Problem 33-6 (C)
Special equipment used solely for product Y 600,000
Labor and material cost 2,000,000
Cost of testing prototype 800,000
Total research and dev. Expense 3,400,000

Problem 33-7 (B)

Salaries of laboratory employees researching how to build the new
car 2,500,000
Design, testing and construction of a prototype 4,000,000
R and D expense 6,500,000

Problem 33-8 (C)

Laboratory research 200,000
Cost of testing prototype 50,000
Construction of reseach facility 400,000
R and D expense 650,000

Problem 33-9 (B)

Laboratory research 750,000
Design of tools, jigs,molds and dies 220,000
Depreciation of equipment 300,000
R and D performed by stone for metal 230,000
Total R and D expense 1,500,000

Problem 33-10 (A)

R and D equipment 450,000
Engineering Cost 1,200,000
Total R and D expense 1,650,000

Problem 33-11 (C)

Machine A - charged entirely to expense 1,000,000
Machine B - (1,000,000/10) 100,000
Total R and Dexpense 1,100,000

Problem 33-12
Question 1 (B)
Duplication of computer software and training materials 2,500,000
Packaging Product 900,000
Total Inventory 3,400,000

Question 2 (B)
Completion od detail program design 1,300,000
Cost incurred for coding and testing 1,000,000
Total Costs charged as expense 2,300,000

Question 3 (C)
Other coding cost 2,400,000
Other testing cost 2,000,000
Cost of producing product 1,500,000
Total cost to be capitalized 5,900,000

Problem 33-13 (A)

Depreciation Expense (9,000,000/3) 3,000,000

Problem 33-14 (B)

Cost for the application development stage 4,000,000
Cost that was capitalized and amortized (8,000,000/4) 2,000,000
Cost of training employees 50,000
Total Expense 6,050,000

Problem 33-15 (D)

The 1,000,000 cost should be charged t computer software on the

premise that there is already a technological feasibility. The 750,000
should be classified as distribution cost

Problem 33-16 (C)

Capitalizable Cost 750,000

Problem 33-17
1. D
2. D
3. D
4. C
5. A
6. C
7. B
8. C

Problem 33-18
1. A
2. B
3. A
4. B
5. A
6. C
7. A
8. B