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    p1 Ia

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    Leika Gay Soriano Olarte
    The document discusses 7 problems related to accounting for intangible assets including patents, trademarks, goodwill, and research and development costs. Problem I asks about capitalizing patent costs. Problem II asks about carrying value of a patent being amortized over a revised useful life. Problem III asks about calculating goodwill from excess earnings. Problem IV asks about goodwill arising from an acquisition. Problem V asks about impairment of a trademark. Problem VI asks about carrying value of a leasehold improvement. Problem VII asks about research and development costs that should be expensed.

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    p1 Ia

    Uploaded by

    Leika Gay Soriano Olarte
    381 views1 page
    The document discusses 7 problems related to accounting for intangible assets including patents, trademarks, goodwill, and research and development costs. Problem I asks about capitalizing patent costs. Problem II asks about carrying value of a patent being amortized over a revised useful life. Problem III asks about calculating goodwill from excess earnings. Problem IV asks about goodwill arising from an acquisition. Problem V asks about impairment of a trademark. Problem VI asks about carrying value of a leasehold improvement. Problem VII asks about research and development costs that should be expensed.

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    The document discusses 7 problems related to accounting for intangible assets including patents, trademarks, goodwill, and research and development costs. Problem I asks about capitalizing patent costs. Problem II asks about carrying value of a patent being amortized over a revised useful life. Problem III asks about calculating goodwill from excess earnings. Problem IV asks about goodwill arising from an acquisition. Problem V asks about impairment of a trademark. Problem VI asks about carrying value of a leasehold improvement. Problem VII asks about research and development costs that should be expensed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    381 views1 page

    p1 Ia

    Uploaded by

    Leika Gay Soriano Olarte
    The document discusses 7 problems related to accounting for intangible assets including patents, trademarks, goodwill, and research and development costs. Problem I asks about capitalizing patent costs. Problem II asks about carrying value of a patent being amortized over a revised useful life. Problem III asks about calculating goodwill from excess earnings. Problem IV asks about goodwill arising from an acquisition. Problem V asks about impairment of a trademark. Problem VI asks about carrying value of a leasehold improvement. Problem VII asks about research and development costs that should be expensed.

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    © All Rights Reserved
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    of 1

    Practical Accounting I

    Intangible Assets
    April 29, 2019

    Problem I

    Danica Company incurred P1,600,000 of research and development costs to develop a product for which a patent was granted on
    January 1, 2019. Legal fees and other costs associated with registration of the patent totaled P300,000. During the year, the entity
    paid P450,000 for legal fees in a successful defense of the patent.

    What amount that should be capitalized as cost of patent?

    Problem II

    On January 1, 2016, Leika Company purchased a patent for P7,140,000. The patent is being amortized over the remaining legal life
    of 15 years. During 2019, the entity determined that the economic benefits of the patent would not last longer than ten years from
    the date of acquisition.

    What is the carrying amount of the patent on December 31, 2019?

    Problem III

    Timothy Company is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted
    to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of the
    entity at current year-end was P10,000,000.

    1. What is the acquisition cost if goodwill is measured by capitalizing excess earnings at 25%?
    2. What is the acquisition cost if goodwill is measured by capitalizing average annual earnings at 25%?

    Problem IV

    Patricia Company purchased another entity for P8,000,000 cash. The assets and liabilities of the acquire are as follows:

    Carrying amount Fair value


    Cash P1,000,000 P1,000,000
    Inventory 400,000 500,000
    In-process R and D 6,000,000 5,000,000
    Assembled workforce 1,100,000 1,200,000
    Liabilities 2,500,000 3,000,000

    What is the goodwill arising from the acquisition?

    Problem V

    On January 1, 2019, Kient Company acquired a trademark for P3,000,000. The trademark has eight years remaining in the legal
    life. It is anticipated that the trademark will be renewed in the future indefinitely without problem. On December 31, 2019, the
    trademark is assessed for impairment. Because of decline in economy, the trademark is expected to generate cash flows of just
    P120,000 annually. The useful life of the trademark is expected to generate cash flows of just P120,000 annually. The useful life
    of the trademark still extends beyond the foreseeable horizon. The appropriate discount rate is 6%.

    What amount should be recognized as impairment loss on trademark for 2019?

    Problem VI

    On January 1, 2016, Danah Company signed a 12-year lease for a building. The entity has an option to renew the lease for an
    additional 6-year period on or before January 1, 2020. During January 2019, the entity made substantial improvement to the
    building. The cost of the improvement was P4,500,000 with an estimated useful life of 10 years. On December 31, 2019, the entity
    intended to exercise the renewal option. The entity has taken a full year depreciation on this improvement.

    On December 31, 2019, what is the carrying amount of the leasehold improvement?

    Problem VII

    Elizabeth Company incurred the following costs during the current year:

    Laboratory research aimed at discovery of new knowledge P750,000


    Design of tools, jigs, molds, and dies involving new technology 220,000
    Quality control during commercial production including routine testing 350,000
    Equipment acquired two years ago, having an estimated useful life of five years
    with no residual value used in various R and D projects 1,500,000
    Research and development services performed by Krizia Company for Elizabeth Company 250,000
    Research and development services performed by Elizabeth Company for Charish Company 200,000
    What amount of research and development expense should be reported in the current year?

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