Fundamentals of Advanced Accounting
6th Edition
ISBN: 9780077862237
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
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Chapter 2, Problem 1DYS
To determine
Explain whether Company N account for the contingent payments promised to the former owners of Company T as consideration transferred in the acquisition or as compensation expense to employees.
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The following information relates to Question 2 and 3:
On July 1, 2018, Gene Parmesan's Genes Company paid $16,500,000 cash and signed a $7,500,000 note payable (due in 3
months) to acquire in-process R&D from another company. They are planning to use the assets acquired for research and
development in their GMB (Genetically Modified Broccoli) division. The assets can be used for other research and development
projects as well. They plan to use the assets purchased for 10 years and believe they can sell them for $1,500,000 at the end of
those 10 years.
From July 1 through Dec. 31, 2018, Genes Co. spends $6,000,000 (palid in cash) on scientist salaries and broccoll plants to use in
the purchased R&D project. Genes Co. also amortizes any capitalized assets on a straight-line basis.
REQUIRED: Write the journal entry related to the acquisition that Genes Co. should record on July 1.2018.
[The following information applies to the questions displayed below.]
Satellite Systems modified its model Z2 satellite to incorporate a new communication device. The company made the
following expenditures:
Basic research to develop the technology
Engineering design work
Development of a prototype device.
Testing and modification of the prototype
Legal fees for patent application
Legal fees for successful defense of the new patent
Total
During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all
costs of the patent. Management contends that the device represents an improvement of the existing communication
system of the satellite and, therefore, should be capitalized.
Exercise 7-7 (Algo) Part 1
$ 3,600,000
1,120,000.
560,000
360,000
76,000
36,000
$ 5,752,000
Required:
1. How much should Satellite Systems capitalize in the Patent account in the balance sheet?
Patent costs capitalized
In 2018, Space Technology Company modified its model Z2 satellite to incorporate a new communication device.The company made the following expenditures:Basic research to develop the technology $2,000,000Engineering design work 680,000Development of a prototype device 300,000Acquisition of equipment 60,000Testing and modification of the prototype 200,000Legal and other fees for patent application on the new communication system 40,000Legal fees for successful defense of the new patent 20,000Total $3,300,000The equipment will be used on this and other research projects. Depreciation on the equipment for 2018 is $10,000.During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized.Required:Prepare correcting entries that reflect the…
Chapter 2 Solutions
Fundamentals of Advanced Accounting
Ch. 2 - Prob. 1QCh. 2 - Prob. 2QCh. 2 - What does the term consolidated financial...Ch. 2 - Within the consolidation process, what is the...Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following does not represent a...Ch. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - An acquired entity has a long-term operating lease...Ch. 2 - When does gain recognition accompany a business...Ch. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - On June 1, Cline Co. paid 800,000 cash for all of...Ch. 2 - On May 1, Donovan Company reported the following...Ch. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15PCh. 2 - Prob. 16PCh. 2 - On its acquisition-date consolidated balance...Ch. 2 - On its acquisition-date consolidated balance...Ch. 2 - Prob. 19PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 21PCh. 2 - Prob. 22PCh. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 31PCh. 2 - Prob. 32PCh. 2 - Prob. 33APCh. 2 - On February 1, Piscina Corporation completed a...Ch. 2 - Prob. 1DYSCh. 2 - Prob. 2DYSCh. 2 - Prob. 3DYS
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