Chapter - Intangible Assets CHAPTER INTANGIBLE ASSETS PROBLEMS 6-1 (Amsterdam Enterprises) a Special equipment Research salaries Costs of testing prototype R & D Expense b c P546,000 51,300 70,800 P668,100 Fees paid to Phil Patent Office Drawings required by the patent office Legal costs of filing patent Patent cost, January 1, 2004 Less amortization of patent for years 2006 and 2007 (59,700/ 17) x yrs Patent carrying value, December 31, 2007 Patent carrying value at December 31, 2008 59,700 x 14/17 Remaining estimated useful life at January 1, 2009 Amortization expense for year 2009 P 7,500 14,100 38,100 P 59,700 7,024 P 52,676 P 49,165 ÷ P 9,833 6-2 (May Company) Patents Cost P192,000 Less accumulated amortization 36,000 + (156,000 ÷ 8) 55,500 P 136,500 License Cost (80 x 600 x 2/3) P 32,000 Less accumulated amortization (32,000/4) 8,000 24,000 Trademark Cost (80 x 600 x 1/3) P 16,000 Less accumulated amortization (16,000/4) 4,000 12,000 Goodwill (12M – 8M) 4,000,000 Total intangible assets P4,172,500 6-3 (July, Inc.) 2001 Jan Patents Cash 196,000 196,000 2001-2004 Dec 31 2005 Jan 2005 Dec 31 Amortization Expense Accumulated Amortization-Patents 196,000 / 10 19,600 Legal Fees Cash 28,000 Amortization Expense Accumulated Amortization-Patents 19,600 Patents 60,000 28,000 19,600 2006 Jan 19,600 42 Chapter - Intangible Assets Cash 60,000 2006-2008 Dec 31 Amortization Expense Accumulated Amortization-Patents 15,800 Amortization Expense Accumulated Amortization-Patents 15,800 x 6/12 = 7,900 7,900 196,000 – (19,600 x 5) = 98,000 (98,000 + 60,000) / 10 = 15,800 15,800 2009 July 1 Loss from Writedown of Patents Accumulated Amortization-Patents Patents 102,700 153,300 196,000 + 60,000 = 256,000 98,000 + (15,800 x 3.5 yrs) = 153,300 6-4 (Boston Company) a Patent cost Estimated useful life Amortization per year P100,000 Amortization expense for 2006 (100,000 x 6/12) 7,900 256,000 P500,000 ÷ yrs P 50,000 b Carrying amount, December 31, 2007 (500,000 – 150,000) P350,000 Estimated market value 150,000 Impairment loss at December 31, 2007 P200,000 c Written down value of patent at December 31, 2007 P150,000 Less depreciation for 2008 150,000 / = 50,000 Carrying amount at December 31, 2008 P100,000 d Sound value at January 1, 2009 P600,000 Carrying amount at December 31, 2008 100,000 Increase in value Recovery of previous impairment loss through lower amortization = 200,000 / 200,000 Revaluation surplus in 2009 6-5 (Summer Company) 2006 R & D Expense Cash 50,000 P500,000 P350,000 500,000 500,000 2007 Jan Patents Cash 120,000 43 120,000 Chapter - Intangible Assets Dec 31 2008 Jan Amortization Expense Accumulated Amortization-Patents Patents Dec 31 12,000 1,200,00 Cash 2008-2009 12,000 Amortization Expense Accumulated Amortization-Patents (120,000-12,000) + 1,200,000 = 1,308,000 1,308,000/15 = 87,200 1,200,00 87,200 87,200 2009 Dec 31 Loss from Writedown of Patents Accumulated Amortization Patents 6-6 6-7 (April Company) Laboratory research Modification of formulation Searching for application Depreciation of equipment (280,000/5) R & D costs for 2009 (Autumn Company) a 2009 Franchise Dec 31 b 2009 Dec 31 c 2009 1,320,00 P 68,000 26,000 19,000 P169,000 6,250,00 Cash Dec 31 1,133,36 186,400 Franchise Fee Expense Cash 500,000 Amortization Expense Accumulated Amortization-Franchise 6,250,000/10 = 625,000; 625,000 x 1/2 312,500 Amortization Expense Accumulated Amortization-Patents 750,000 x 9.5/10 = 712,500; 712,500 / 142,500 56,000 6,250,00 500,000 R & D Expense Equipment Accumulated Depreciation-Equipment Cash R&D=200,000+1,400,000+600,000+100,000= 2,300,000 44 312,500 142,500 2,300,00 1,000,00 100,000 3,200,00 Chapter - Intangible Assets (1,000,000 / 5) x ½ = 100,000 6-8 (KC Company) a Fair value of net assets (1,000,000 + 1,700,000 + 5,900,000 – 2.360,000) Cash purchase price Goodwill b Trade Receivables Inventory Property, Plant and Equipment Goodwill Current Liabilities Noncurrent Liabilities P6,240,000 7,000,000 P 760,000 1,000,00 1,700,00 5,900,00 760,000 Cash 6-9 (Global Computer Corporation) a R & D Expense Software Cash b 6-10 800,000 500,000 Amortization Expense Accumulated Amortization-Software 500,000 x 1.4M/4M = 1,300,000 (Sun Company) a Downpayment Present value of future payments 200,000 x 2.4869 Total cost b Amortization Expense for 2006 897,380 / 5yrs c 760,000 1,600,00 7,000,00 1,300,00 175,000 175,000 P400,000 497,380 P897,380 P179,476 2009 Jan Dec 31 31 2010 Jan Franchise Discount on Notes Payable Cash Notes Payable 897,380 102,620 400,000 600,000 Interest Expense Discount on Notes Payable 10% x 497,380 = 57,600 49,738 Amortization Expense Accumulated Amortization-Franchise 179,476 Notes Payable Cash 200,000 49,738 179,476 200,000 45 Chapter - Intangible Assets MULTIPLE CHOICE QUESTIONS Theory MC1 c MC6 d MC2 c MC7 b MC3 d MC8 d MC4 a MC9 b MC5 b MC1 c Problems MC21 d MC22 a MC23 c MC24 b MC25 b MC26 MC27 MC28 MC29 MC30 MC31 MC32 MC33 MC34 MC35 MC36 MC37 MC38 MC39 MC40 b c c b a c c a d c b c b d a MC1 MC1 MC1 MC1 MC1 d a d b a MC1 MC1 MC1 MC1 MC2 b c c d c 244,000 + 100,000 = 344,000 P0 750,000 + 150,000 = 900,000 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 = 70,500 125,000 ÷ 10 = 12,500; 272,500 ữ = 54,500 x ẵ = 27,250 656,200 ÷ 17 = 38,600; 12,500 + 27,250 + 38,600 = 78,350 200,000 + (100,000 x 2.91) = 491,000 340,000 ÷ 10 = 34,000 x ½ = 17,000 340,000 – 17,000 – 34,000 = 289,000 289,000 ÷ = 57,800 P0 68,000 + 24,000 + 6,000 + 19,000 = 117,000 152,000 ÷ = 19,000 1,440,000 x 1.5/10 = 216,000 40,000 + 5,000 = 45,000 900,000 x 7/10 = 630,000 210,000 + 300,000 + 400,000 + 220,000 + 260,000 = 2,080,000 1,500,000 ÷ 30 = 50,000 1,000,000 480,000 ÷ 10 = 48,000 (480,000 x 5/10) + 200,000 = 440,000; 440,000 ÷ 10 = 44,000 46 Chapter - Intangible Assets MC41 MC42 b b MC43 MC44 c d MC45 a 440,000 – (44,000 x 3.5 yrs) = 286,000 270,000 x 6/10 = 162,000; 162,000 ÷ = 54,000; 162,000 – 54,000 = 108,000 1,150,000 – 525,000 = 625,000; 700,000 – 625,000 = 75,000 1/5=20%; Depreciation is the higher rate which is 30%; thus carrying amount is 70% 1,500,000 ÷ 5,000,000 = 30%; 30% x 2,500,000 = 750,000 47 ... 1,320,00 P 68 ,000 26, 000 19,000 P 169 ,000 6, 250,00 Cash Dec 31 1,133, 36 1 86, 400 Franchise Fee Expense Cash 500,000 Amortization Expense Accumulated Amortization-Franchise 6, 250,000/10 = 62 5,000; 62 5,000... 440,000 ÷ 10 = 44,000 46 Chapter - Intangible Assets MC41 MC42 b b MC43 MC44 c d MC45 a 440,000 – (44,000 x 3.5 yrs) = 2 86, 000 270,000 x 6/ 10 = 162 ,000; 162 ,000 ÷ = 54,000; 162 ,000 – 54,000 = 108,000... Liabilities Noncurrent Liabilities P6,240,000 7,000,000 P 760 ,000 1,000,00 1,700,00 5,900,00 760 ,000 Cash 6- 9 (Global Computer Corporation) a R & D Expense Software Cash b 6- 10 800,000 500,000 Amortization