PROBLEMS 6-1. (Daydream Corporation)
a. Expense, cost of internally developed publishing title is not allowed to be capitalized. b. Intangible
c. Expense d. Intangible e. Intangible f. Prepaid expense
g. With alternative use, PPE; otherwise, unrecoverable cost, R and D expense h. Charged to RE
i. Expense
j. Intangible k. Intangible l. Expense
m. Expense, copyright shall be written off in profit or loss
n. Expense o. Expense p. PPE q. Expense r. Expense
6-2. (Amsterdam Enterprises, Inc.)
a. Special equipment (600,000 – 460,000) P140,000
Research salaries 51,300
Costs of testing prototype 70,800
R & D Expense P262,100
b. Fees paid to Phil. Patent Office P 7,500
Drawings required by the patent office 14,100
Legal costs of filing patent 38,100
Patent cost, January 1, 2010 P 59,700
Less amortization of patent for years 2010 and 2011
(59,700/ 10) x 2 yrs. 11,940
Patent carrying value, December 31, 2011 P 47,760
c. Patent carrying value at December 31, 2012
59,700 x 7/10 P 41,790
Remaining estimated useful life at January 1, 2013 ÷ 5
Amortization expense for year 2013 P 8,358
d. Carrying value, January 1, 2013 P41,790
Less amortization expense for 2013 8,358
Carrying value, December 31, 2013 P33,432
6-3. (May Company) Patents
Cost P192,000
Less accumulated amortization
36,000 + (156,000 ÷ 8) 55,500 P 136,500 License
Cost (100 x 600 x 2/3) P 40,000
Less accumulated amortization (40,000/4) 10,000 30,000 Trademark
6-4. (July, Inc.)
2005
Jan. 3 Patents 196,000
Cash 196,000
2005-2008
Dec. 31 Amortization Expense - Patents 19,600
Accumulated Amortization-Patents 19,600
196,000 / 10
2009
Jan. 1 Legal Fees 28,000
Cash 28,000
Dec. 31 Amortization Expense 19,600
Accumulated Amortization-Patents 19,600
2010
Jan. 1 Patents 60,000
Cash 60,000
2010-2012
Dec. 31 Amortization Expense 15,800
Accumulated Amortization-Patents 15,800
196,000 – (19,600 x 5) = 98,000 (98,000 + 60,000) / 10 = 15,800
2013
July 1 Amortization Expense 7,900
Accumulated Amortization-Patents 7,900
15,800 x 6/12 = 7,900
1 Loss from Write off of Patents 102,700
Accumulated Amortization-Patents 153,300 Patents 256,000 196,000 + 60,000 = 256,000 98,000 + (15,800 x 3.5 yrs) = 153,300 6-5. (ToGo Company) Carrying value P4,000,000 Recoverable value 150,000/10% = 1,500,000 x 80% P1,200,000 300,000/10% = 3,000,000 x 20% 600,000 1,800,000 Impairment loss P2,200,000 6-6. (Boston Company) a. Patent cost P500,000
Estimated useful life ÷ 5 yrs.
Amortization per year P100,000
Amortization expense for 2010 (100,000 x 6/12) P 50,000
b. Carrying amount, December 31, 2011 (500,000 – 150,000) P350,000
Estimated recoverable amount 150,000
Impairment loss at December 31, 2011 P200,000
c. Written down value of patent at December 31, 2011 P150,000
Less amortization for 2012
150,000 / 3 50,000
d. Sound value at January 1, 2013 P600,000
Carrying amount at December 31, 2012 100,000
Increase in value P500,000
Impairment loss P200,000
Recovery of previous impairment loss through lower
amortization (100,000 – 50,000) 50,000 150,000 Revaluation surplus in 2013 P350,000 6-7. (Summer Company) 2010 R & D Expense 500,000 Cash 500,000 2011 Jan. 1 Patents 120,000 Cash 120,000
Dec. 31 Amortization Expense 12,000
Accumulated Amortization-Patents 12,000
2012
Jan. 1 Patents 1,200,000
Cash 1,200,000
2012-2013
Dec. 31 Amortization Expense 87,200
Accumulated Amortization-Patents 87,200
(120,000-12,000) + 1,200,000 = 1,308,000 1,308,000/15 = 87,200
2013
Dec. 31 Loss from Write down of Patents 1,133,600
Accumulated Amortization 186,400 Patents 1,320,000 6-8. (April Company) Laboratory research P 68,000 Modification of formulation 26,000 Testing 24,000
Searching for application 19,000
Depreciation of equipment (280,000/5) 56,000
R & D costs for 2013 P193,000
6-9. (Autumn Company) a.
2013 Franchise 6,250,000
Cash 6,250,000
Dec. 31 Franchise Fee Expense (5% x 10,000,000) 500,000
Cash /Accrued Expenses 500,000
31 Amortization Expense 312,500
Accumulated Amortization-Franchise 312,500
6,250,000/10 = 625,000; 625,000 x 1/2 b.
Dec. 31 Amortization Expense 142,500
Accumulated Amortization-Patents 142,500
c. R & D Expense 2,300,000 Equipment 1,000,000 Accumulated Depreciation-Equipment 100,000 Cash 3,200,000 R&D=200,000+1,400,000+600,000+100,000= 2,300,000 (1,000,000 / 5) x ½ = 100,000
6-10. (Global Computer Corporation)
a. R & D Expense 800,000
Software Costs 500,000
Cash 1,300,000
b. Amortization Expense 125,000
Accumulated Amortization-Software Costs 125,000
500,000 / 4 years = 125,000 500,000 x 1M/5 M= 100,000 6-11. (Sun Company)
a. Downpayment P 500,000
Present value of future payments
300,000 x 2.4869 746,070
Total cost P1,246,070
b. Amortization Expense for 2013
1,246,070 / 10yrs P 124,607
c.
2013
Jan. 1 Franchise 1,246,070
Discount on Notes Payable 153,930
Cash 500,000
Notes Payable 900,000
Dec. 31 Interest Expense 74,607
Discount on Notes Payable 74,067
10% x 746,070 = 74,607 31 Amortization Expense 89,738 Accumulated Amortization-Franchise 89,738 2014
Jan. 1 Notes Payable 300,000
Cash 300,000
6-12. (Winter Company)
a. Cash purchase price P7,000,000
Fair value of net assets
(1,000,000 + 1,700,000 + 5,900,000 – 2.360,000) 6,240,000
Goodwill P 760,000
b. Trade Receivables 1,000,000
Inventory 1,700,000
Property, Plant and Equipment 5,900,000
Goodwill 760,000
Current Liabilities 760,000
Noncurrent Liabilities 1,600,000
6-13. (Bagong Silangan Company)
a. Recoverable amount of the CGU P13,100,000
Carrying amount of the CGU 13,400,000
Impairment of CGU P 300,000
Impairment Loss 300,000
Goodwill 300,000
b. Recoverable amount of the CGU P12,400,000
Carrying amount of the CGU 13,400,000
Impairment loss P 1,000,000
Reported goodwill per ledger 400,000
Decrease in value of identifiable noncurrent assets P 600,000
Impairment loss 1,000,000
Goodwill 400,000
Land (5/13 x 600,000) 230,769
Accumulated depreciation – Building (6.2/13 x 600,000) 286,154 Accumulated amortization – Patents (1/13 x 600,000) 46,154 Accumulated amortization – Trademarks (.8/13 x 600,000) 36,923
MULTIPLE CHOICE QUESTIONS Theory MC1 D MC6 A MC11 B MC16 B MC2 D MC7 C MC12 D MC17 A MC3 C MC8 D MC13 B MC18 B MC4 B MC9 B MC14 D MC19 D MC5 B MC10 D MC15 C MC20 C Problems MC21 D 244,000 + 100,000 = 344,000 MC22 C Initial franchise fee of P1,000,000 MC23 C 750,000 + 150,000 = 900,000 MC24 B 200,000 + (100,000 x 2.91) = 491,000 MC25 B 1,200,000 x 2/50 = 48,000; (750,000 ÷ 10) x 2/12 = 12,500 60,000 x 2/12 = 10,000; 48,000 + 12,500 + 10,000 = 70,500 MC26 B 125,000 ÷ 10 = 12,500; 272,500 ÷ 5 = 54,500 x ½ = 27,250 656,200 ÷ 17 = 38,600; 12,500 + 27,250 + 38,600 = 78,350 MC27 C 340,000 ÷ 10 = 34,000 x ½ = 17,000 MC28 C 340,000 – 17,000 – 34,000 = 289,000 MC29 B 289,000 ÷ 5 = 57,800 MC30 A P0 MC31 C 68,000 + 24,000 + 6,000 + 19,000 = 117,000 MC32 C 152,000 ÷ 8 = 19,000 MC33 A 1,440,000 x 1.5/10 = 216,000 MC34 A 40,000 + 5,000 = 45,000 MC35 C 900,000 x 7/10 = 630,000 MC36 B 210,000 + 300,000 + 400,000 + 220,000 + 260,000 = 1,390,000 MC37 C 1,500,000 ÷ 30 = 50,000 MC38 D 480,000 ÷ 10 = 48,000 MC39 A (480,000 x 5/10) + 200,000 = 440,000; 440,000 ÷ 10 = 44,000 MC40 B 440,000 – (44,000 x 3.5 yrs) = 286,000 MC41 B 270,000 x 6/10 = 162,000; 162,000 ÷ 3 = 54,000; 162,000 – 54,000 = 108,000 MC42 C 1/5=20%; Depreciation is the higher rate, 20%; thus carrying amount is 80%
MC43 C 25% X 6M = 1,500,000
MC44 A 1,500,000 ÷ 5,000,000 = 30%; 30% x 2,500,000 = 750,000
