Purchase price 2,000,000

Non-refundable value added tax 150,000

Legal cost incurred to register the
new trademark 105,000
Cost of trademark 2,255,000

Cost of patent – Jan.1, 2016 9,000,000

Accumulated Amortization
(9,000,000/15 x 5) (3,000,000)
Carrying Amount – Jan. 1, 2021 6,000,000
Amortization (6,000,000/5) 1,200,000

Patent-Jan. 1, 2018
(7,200,000/6) x 3 3,600,000
Useful life – Jan. 1, 2021 20 years
Amortization expense-2021 180,000
Legal cost for filling of patent 250,000
Fees paid to government patent office 60,000
Drawings required with patent application 30,000
Cost of patent 340,000

Down payment 7,000,000

Present value of 4 annual payments
(2,000,000 x 2.91) 5,820,000
Cost of franchise 12,820,000

Acquisition cost 12,000,000

Less: Fair value on net assets
(9,500,000 – 5,000,000) 4,500,000
Goodwill 7,500,000
Depreciation 3,000,000
Salaries 7,000,000
Indirect costs appropriately allocated 2,000,000
Materials used 1,800,000
R&D expense 13,800,000

R&D services performed 1,500,000

Design, construction, and testing of preproduction prototypes 2,000,000
R&D expense 3,500,000

New software package 15,000,000

Useful life 3 years
5,000,000

ZERO , (10,000,000 and 7,500,000 are administrative expenses)