Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
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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Carm Ltd. is a company in the high-technology industry and follows IFRS. Carm has been
working on developing a new solar panel technology. The technology meets all of the six criteria
required in order to capitalize development costs. During 2022, Carm incurred the following
costs related to research and development:
Costs to train staff
Legal costs to obtain new patent for technology
Legal costs of defending new patent in court
Materials consumed in manufacture of prototypes
Consulting fees paid for general research
Indirect costs related to research and development
$390,000
Select one:
O True
O False
$50,000
$36,000
$13,100
$45,200
$9,700
Based on the above information, the amount that Carm would be allowed to capitalize as an
intangible asset is $99,100.
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.
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
Soft Bound Version for Advanced Accounting 13th Edition
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 - Problems 19 and 20 are based on the following...Ch. 2 - In the December 31, 2017, consolidated balance...Ch. 2 - Prob. 21PCh. 2 - The following book and fair values were available...Ch. 2 - Prob. 23PCh. 2 - Prob. 24PCh. 2 - Prob. 25PCh. 2 - Prob. 26PCh. 2 - Prob. 27PCh. 2 - Prob. 28PCh. 2 - Prob. 29PCh. 2 - Prob. 30PCh. 2 - Prob. 31PCh. 2 - SafeData Corporation has the following account...Ch. 2 - Prob. 33PCh. 2 - Prob. 34PCh. 2 - Prob. 35APACh. 2 - On February 1, Piscina Corporation completed a...Ch. 2 - Prob. 37APBCh. 2 - Prob. 38APBCh. 2 - Prob. 1DYSCh. 2 - Prob. 2DYSCh. 2 - Prob. 3DYSCh. 2 - Prob. 4DYS
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