Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 12, Problem 8P
1.
To determine
Prepare a schedule for the expenses related to intangible assets of Company M at December 31, 2019.
2.
To determine
Prepare the intangible assets section of Company M’s balance sheet at December 31, 2019.
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Pharoah Corp., reporting under ASPE, has provided the following information regarding its intangible assets:
1.
Â
A patent was purchased from Marvin Inc. for $1.1 million on January 1, 2019. Pharoah estimated the patent’s remaining useful life to be 10 years. The patent was carried in Marvin’s accounting records at a carrying amount of $1,400,000 when Marvin sold it to Pharoah. On January 1, 2020, because of recent events in the field, Pharoah estimates that the remaining life of this patent is only five years from January 1, 2020.
2.
Â
During 2020, a franchise was purchased from Burr Ltd. for $304,000. As part of the deal, Burr must also be paid 6% of revenue from the franchise operations. Revenue from the franchise for 2020 was $1.2 million. Pharoah estimates the franchise’s useful life to be 10 years and takes a full year’s amortization in the year of purchase.
3.
Â
Pharoah incurred the following research costs in 2020:
Materials and equipment
Â
$81,200
Personnel…
The Randolph Company purchased a patent on June 1, 2016 for
$1,188,000 with twelve years remaining on the patent's legal
life.
useful economic life of only nine years.
It is estimated, however, that this patent will have a
Questions:
A. Amortization Expense For 2016 & 2017:
2016
2017
B. Balance Sheet Presentation on 9/30/2019:
Note: Generally, no accumulated amortization account is generally used
for intangibles, and thus they are presented on a single line at net
book value.
C. How much can be received for the patent on 3/31/17?
D. Gain or loss before taxes if patent sold on 8/31/21 for
$300,000?
Where will this item be reported on the income
statement?
Dollar Amount
Gain or Loss?
Location on Income Statement
Binson Company has provided information on intangible assets as follows:
A patent was purchased from Lou Company for $1,515,000 on January 1, 2018. Binson estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of $1,285,000 when Lou sold it to Binson.
During 2019, a franchise was purchased from Rink Company for $440,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $1,500,000. Binson estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.
Binson incurred R&D costs in 2019 as follows:
Materials and equipment
$104,000
Personnel
155,000
Indirect costs
73,000
Â
$332,000
Binson estimates that these costs will be recouped by December 31, 2020.
On January 1, 2019, Binson estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018,…
Chapter 12 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 12 - Prob. 1GICh. 12 - Prob. 2GICh. 12 - Prob. 3GICh. 12 - Prob. 4GICh. 12 - Prob. 5GICh. 12 - Prob. 6GICh. 12 - Prob. 7GICh. 12 - What activities are included in RD? Which are...Ch. 12 - What elements of RD activities does a company...Ch. 12 - How does a company record a patent worth 100,000...
Ch. 12 - Prob. 11GICh. 12 - Prob. 12GICh. 12 - Over how many years are patents amortized?...Ch. 12 - Prob. 14GICh. 12 - Prob. 15GICh. 12 - Prob. 16GICh. 12 - Prob. 17GICh. 12 - Prob. 18GICh. 12 - Prob. 19GICh. 12 - Prob. 20GICh. 12 - What is the proper time or time period over which...Ch. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Which of the following assets typically are...Ch. 12 - Prob. 5MCCh. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - Steel Magnolia Incorporated purchased a trademark...Ch. 12 - Match the following items with correct accounting...Ch. 12 - Notting Hill Company incurred the following costs...Ch. 12 - Hook Corp. incurred the following start-up costs,...Ch. 12 - Mystic Pizza Company purchased a patent from Prime...Ch. 12 - Mystic Pizza Company purchases a franchise from NY...Ch. 12 - Prob. 7RECh. 12 - Prob. 8RECh. 12 - Prob. 9RECh. 12 - Prob. 10RECh. 12 - Prob. 1ECh. 12 - On January 4, 2019, Franc Company purchased for...Ch. 12 - On January 11, 2019, Hughes Company applied for a...Ch. 12 - Gansac Publishing Company signed a contract with...Ch. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - KLK Clothing Company manufactures professional...Ch. 12 - Cressman Company incurred RD costs for various...Ch. 12 - In 2019, Lalli Corporation incurred RD costs as...Ch. 12 - Kling Company was organized in late 2019 and began...Ch. 12 - Prob. 11ECh. 12 - Prob. 12ECh. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Company is considering purchasing EKC Company....Ch. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Halpern Companys controller prepared the following...Ch. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Hamilton Companys balance sheet on January 1,...Ch. 12 - Prob. 8PCh. 12 - Lee Manufacturing Corporation was incorporated on...Ch. 12 - Information concerning Tully Corporations...Ch. 12 - Prob. 11PCh. 12 - In examining Samson Manufacturing Companys books,...Ch. 12 - Prob. 2CCh. 12 - Prob. 3CCh. 12 - Prob. 4CCh. 12 - On June 30, 2019, your client, Sprauge...Ch. 12 - Prob. 6CCh. 12 - NBC paid 401 million for the rights to televise...Ch. 12 - Prob. 8C
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