Which of the following is included in research  Legal work on patent applications, sales

and development expense? licensing or litigation – 3,000,000

 Design, construction, and operation of a
a. The acquisition cost of a building to be
pilot plant not of a scale economically
used in various research and
feasible for commercial production –
development projects
3,225,000 /
b. The cost of quality control during
commercial production On January 2, 20x4, Blue Co. brought a
c. The cost of a pilot plant that is available trademark from shoes, Inc. for 300,000 the
for commercial production carrying amount of the trademark in shoes,
d. The annual depreciation of the building Inc.’s book is 240,000. How much is the
referred to in choice (a) amortization expense in 20x4? 0
In January 20x1, Hera Corporation purchased a DEF Co. incurred 100,000 additional costs in
patent for new customer product for 1,200,000 maintaining the customer lists. All the items
at the time of purchase, the patent was valid for are considered to have an indefinite useful
15 years. Due to the competitive nature of the life. How much is the total carrying amount
product, however the patent was estimated to of the capitalized intangible assets at year-
have a useful life of only 10 years. During 20x6, end?
the product was permanently removed from
the market under governmental order because  Internally developed goodwill – 100,000
of a potential health hazard present in the  Brands – 230,000
product. What amount should Hera charge to  Mastheads – 50,000
expense during 20x6, assuming amortization is  Publishing titles – 100,000
recorded at the end of each year? 160,000  Customer lists – 70,000

On January 1, 20x0, watts Company purchased a Andre Co. was granted a patent on January 1,
copyright for 600,000, having an estimated 20x1. The patent was appropriately recognized
useful life of 16 years. In January 20x4, Watts at 800,000 and estimated to have a useful life of
paid 90,000 for legal fees in a successful 10 years. In 20x3, Andre Co. incurred 100,000 in
defence of the copyright. Copyright successfully defending the patent in an
amortization expense for the year ended infringement suit. However, two months after
December 31, 20x4, should be? 31, 875 the suit, Andre Co. sold the intangible asset to
the plaintiff for 600,000. Andre Co.’s policy is to
How much is the research and development recognize a full-year’s amortization in the year
expense in 20x1? 15,825,000 of acquisition and none in the year of
DEF Co. incurred the following costs during derecognition. How much is the gain (loss) on
20x1: disposal recognized in Andre Co.’s 20x3
statement of profit or loss? (40,000)
 Activities directed to the development
Theoretically copyrights should be amortized
of knowledge, including the design and
over:
construction engineering of a prototype
equipment – 4,800,000 / a. Their legal life
 Design of tools, jigs, and dies involving b. The life of the creator plus 50 years
new technology – 7,800,000 / c. Twenty years
 d. Their useful life or legal life, whichever The records of DEF Co., show the following:
is shorter
 Masthead, purchased from a
How much is the research and development competitor – 50,000
expense in 20x1? 475,000  Costs of marketing research – 30,000
 Web site costs, for external use,
DEF Co. incurred the following costs during
customers can place order from the
20x1:
website – 60,000
 Testing in process in search for  Web site costs, for external use,
alternative – 230,000 / customers cannot place order from the
 Adaptation of an existing capability to a website – 40,000
particular requirement or customer’s  Excess of costs over fair value of
need – 140,000 identifiable net assets of acquired
 Design, construction, and testing of associate – 100,000
preproduction prototypes and models –  Subsequent expenditures on a
120,000 / recognized trademark – 20,000
 Routine designs of tools, jigs, moulds
Baguio Corp. incurred 350,000 of research and
and dies – 125,000 /
development costs to develop a product for
Which of the following is not accounting for which a patent was granted on January 2, 20x1.
under PAS 38 intangible assets? Legal fees and other costs associated with
registration of the patent totalled 100,000. On
a. An externally acquired nonmonetary
March 31, 20x6, Baguio paid 150,000 for legal
asset without physical substance that is
fees in a successful defence of the patent. What
inseparable but arises from contractual
total amount is capitalized for the patent
or other legal rights
through March 31, 20x6? 100,000
b. An intangible asset, included in the
identifiable assets of a company How much is the research and development
acquired by an entity, which the entity expense in 20x1? 500,000
does not intend to use in its operations
DEF Co. incurred the following costs during
c. A patent acquired by way of donation
20x1:
from another entity
d. Goodwill arising from acquisition of a  Search for application of new research
business findings – 120,000 /
 Laboratory research aimed at discovery
According to PAS 38, intangible assets are
of a new knowledge – 180,000 /
initially recognized at
 Routine, on-going efforts to refine,
a. Fair value enrich or improve the qualities of an
b. Cost existing product – 200,000 /
c. Fair value less costs to sell  Trouble-shooting break-downs during
d. Any of these as a matter of accounting production – 150,000
policy

How much is the total intangible assets?

110,000
How much is the research and development 10 years. How much is the amortization
expense in 20x1? expense in 20x4? 0

DEF Co. incurred the following costs during Ms Pen Dot the accountant of fire & ice Co.
20x1: is determining the amount of research and
development expense to be recognized by
 Engineering follow-through in an early
her company during the period. Have a
phase of production – 20,000
heart and help her out. Which of the
 Conceptual formulation and design of
following shall Ms Pen and Dot include in
possible product alternatives – 100,000
research and development expense?
 Periodic design changes to existing
products – 30,000 a. The current depreciation of an
 Radical modification of the design of a equipment acquired solely for project X
product – 80,000 (an R&D project)
b. The costs of research performed by fire
DEF Co. purchased from XYZ Co. an intangible & ice Co. for poison Co. during the
asset for $10,000. A 5% discount is available on period
the purchase. On acquisition date, the exchange c. The cost of marketing research to
rate was P46:$1. Installation and testing costs identify the pattern of consumption of
amounted to $25,000. How much is recorded as fire & ice co.’s products in different
an intangible asset? 462,000 geographical locations
The major problem of accounting for intangible d. The costs of research performed by
asset is determining: every rose co. for fire & ice co. during
the period
a. Fair market value
b. Separability How much is the impairment loss?
c. Salvage vale On January 1, 20x1, ABC Co. treated its
d. Useful life equipment for impairment. The following
An entity purchased a patent. The original information was determined on this date:
owner of the patent had held it for 5 years. The  Carrying Amount – 1,000,000
entity shall amortize the patent
 Fair value – 800,000
a. Over the patent’s remaining useful life  Costs of disposal – 80,000
b. Over the patent’s remaining legal life  Present value of future cash flows from
c. Over the patent’s remaining useful life the asset – 700,000
not to exceed 20 years.
d. Over the patent’s useful life not to
exceed 15 years

On January 2, 20x4, Blue Co. brought a

trademark from shoes, Inc. for 300,000 the
carrying amount of the trademark in shoes,
Inc.’s book is 240,000. An independent
research company estimated that the
remaining useful life of the trademark was