On January 1, 2022, Rover, Inc. purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for P240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Rover expects the useful life to be only eight more years. In addition, Rover purchased equipment related to production of the new clothing for P140,000. The equipment has a physical life of 10 years but Rover plans to use the equipment only over the patent's service life and then sell it for an estimated P20,000. Rover uses straight-line for all long-term assets. The amount charged to expense in 2022 related to the patent and equipment should be: P31,000. P45,000. P40,000. P38,000.

On January 1, 2022, Rover, Inc. purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for P240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Rover expects the useful life to be only eight more years. In addition, Rover purchased equipment related to production of the new clothing for P140,000. The equipment has a physical life of 10 years but Rover plans to use the equipment only over the patent's service life and then sell it for an estimated P20,000. Rover uses straight-line for all long-term assets. The amount charged to expense in 2022 related to the patent and equipment should be: P31,000. P45,000. P40,000. P38,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Splish Brothers Industries had one patent recorded on its books as of January 1, 2020. This patent had a book value of $480,000 and a remaining useful life of 8 years. During 2020, Splish Brothers incurred research and development costs of $92,000 and brought a patent infringement suit against a competitor. On December 1, 2020, Splish Brothers received the good news that its patent was valid and that its competitor could not use the process Splish Brothers had patented. The company incurred $127,500 to defend this patent. At what amount should patent(s) be reported on the December 31, 2020, balance sheet, assuming monthly amortization of patents? The amount to be reported $
Martinez Corporation uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $9.00 million and had an estimated useful life of 8 years with no residual value. In early April 2020, a part costing $790,000 and designed to increase the machinery’s efficiency was added. The machine’s estimated useful life did not change with this addition. By December 31, 2020, new technology had been introduced that would speed up the obsolescence of Martinez’s equipment. Martinez’s controller estimates that expected undiscounted future net cash flows on the equipment would be $5.67 million, and that expected discounted future net cash flows on the equipment would be $5.22 million. Fair value of the equipment at December 31, 2020, was estimated to be $5.04 million. Martinez intends to continue using the equipment, but estimates that its remaining useful life is now four years. Martinez uses straight-line depreciation. Assume that Martinez is a private…
On April 20, 2020, Wilhamette Incorporated purchased the right to remove timber from a 20,000-acre tract of land in Oregon over the next three years, and the company estimates no residual value. The timber is to be sold as lumber for new home construction. The cost of the timber rights was $600,000, with estimated salable timber feet of 800,000. During 2020 and 2021, Wilhamette harvested and sold 650,000 feet of timber. What is the book value of the timber rights at the end of 2021, assuming the company uses the units-of-production method?
Corporation was granted a patent on a product on January 1, 2004. To protect its patent. the corporation purchased on January 1, 2015 a patent on a competing product which was originally issued on January 10, 2011. The cost of the competing patent should be: a. amortized over a maximum period of 20 years. b. amortized over a maximum period of 16 years. c. amortized over a maximum period of 9 years. d. expensed in 2015 Explain each choices. Why is it not the answer or why it is the answer.
Robotix Company purchases a patent for $21,000 on January 1. The patent is good for 18 years, after which anyone can use the patent technology. However, Robotix plans to sell products using that patent technology for only 5 years. Prepare the intangible asset section of the year end balance sheet after amortization expense for the year is recorded.
On January 2, 2025, Ivanhoe Co. bought a trademark from Rice, Inc. for $1641000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Rice's books was $1969200. Ivanhoe expects that the trademark will produce 25% of its cash flows in year 1, 20% in year 2, 15% in year 3, and 10% in the remaining years. In Ivanhoe's 2025 income statement, what amount should be reported as amortization expense? Select answer from the options below - $410250 $318200 $273500 $164100
a
The Western Company, a company that follows IFRS, provided you with the following information about a number of transactions that took place in 2020: 1) On January 1, 2020 Western acquired a patent for $45,000 cash. The patent expires on January 1, 2028, but the company determined that it will generate future benefits for 6 years from the date of acquisition. During 2022, the total useful life of the patent was revised to 4 years. 2) During March 2020, The Wester Company invested $120,000 in research costs about a new product that it aims to develop in 2021. The amount was paid in cash. 3) The Western Company estimates that its internal goodwill is worth $980,000 in July 2020. Required- a) Prepare the journal entries related to the patent from January 1, 2020 to December 31, 2022. b) Prepare the journal entries for 2 and 3. If no journal entry is required, justify why.
Fundo entered into a 20-year operating lease for a property on 1 October 2000 which has a remaining life of eight years at 1 October 2012. The rental payments are $2.3 million per annum. Prior to 1 October 2012, Fundo obtained permission from the owner of the property to make some internal alterations to the property so that it can be used for a new manufacturing process which Fundo is undertaking. The cost of these alterations was $7 million and they were completed on 1 October 2012 (the time taken to complete the alterations can be taken as being negligible). A condition of being granted permission was that Fundo would have to restore the property to its original condition before handing back the property at the end of the lease. The estimated restoration cost on 1 October 2012, discounted at 8% per annum to its present value, is $5 million. Required: (a) Explain how the lease, the alterations to the leased property and the restoration costs should be treated in the financial…
On January 1, 2021, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2024, at which time possession of the leased asset will revert back to Aqua. The equipment cost Aqua $412,184 and has an expected economic life of five years. Aqua expects the residual value at December 31, 2024, to be $50,000. Negotiations led to Maywood guaranteeing a $70,000 residual value. Equal payments under the lease are $100,000 and are due on December 31 of each year with the first payment being made on December 31, 2021. Maywood is aware that Aqua used a 5% interest rate when calculating lease payments.Required:1. Prepare the appropriate entry for Maywood on January 1, 2021, to record the lease.2. Prepare all appropriate entries for Maywood on December 31, 2021, related to the lease.
Christina Co. has a factory equipment with a carrying amount of P700,000 and has a remaining useful life of 7 years. On January 1, 2020, Christina agreed to an exchange transaction with Kat & Inc. to transfer the equipment to the latter. The transfer satisfied the requirements of PFRS 15 to be a sale and Christina immediately leased it back for a lease term equal to the remaining life of the equipment. The sales price amounted to P500,000 while annual rental payable at the end of each year is P100,000 for an implicit rate of 10%. Selling price is equal to fair value. How much loss shall Christina recognize in relation to the sale and leaseback transaction? a. 681,578.63 b. 200,000 c. 194,736.75 d. 5,263.25
In January 2021, Blossom Corporation purchased a patent for a new consumer product for $558900. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. In 2026 the product was determined to be obsolete due to a competitor's new product. What amount should Blossom report on the income statement during 2026 related to the patent, assuming straight-line amortization is recorded at the company's December 31 year-end? $35890 O $279450 O $578900 O $179450