FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781618533111
Author: DYCKMAN
Publisher: Cambridge Business Publishers
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On June 30, 2021, Epstein completed the acquisition of the Johnstone Corporation for $1,520,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,300,000.Included in the assets purchased from Johnstone was a patent that was valued at $67,200. The remaining legal life of the patent was 13 years, but Epstein believes that the patent will only be useful for another eight years.Epstein acquired a franchise on October 1, 2021, by paying an initial franchise fee of $168,000. The contractual life of the franchise is 10 years. Required:
1. Prepare year-end adjusting journal entries to record amortization expense on the intangibles at December 31, 2021.2. Prepare the intangible asset section of the December 31, 2021, balance sheet.
On January 1, 2018, Don Company purchased a patent from an original patentee for 2,400,000. The remaining legal life of the patent is 15 years but the useful life is only 12 years. On January 1, 2019, the entity paid 550,000 in successfully defending the patent in an infringement suit files against the entity. On January 1, 2020, the entity acquired a competing patent for 1,500,000. The competing patent has a remaining legal life of 15 years but it is not to be used because it was intended to protect the original patent. What is the carrying amount of the patent on Dec 31, 2020?
Question 33 options:
3,150,000
3,600,000
3,200,000
3,500,000
On January 3, 2018, Tracer Incorporated purchased a patent for $450,000 to manufacture a new type of chair. The patent has a remaining legal life of twelve years. Tracer plans to manufacture the chair for eight years and then sell the patent for $50,000. The company amortizes intangible assets using the straight-line method. On December 29, 2020, Tracer decides to sell the patent for $325,000. Assuming the company has a December 31 year-end, what is the gain or loss recorded on the sale of the patent?
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- Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.arrow_forwardOn September 30, 2019, Leeds LTD. acquired a patent in conjunction with the purchase of another company. The patent, valued at $6 million, was estimated to have a 10-year life and no residual value. Leeds uses the straightline method of amortization for intangible assets. At the beginning of January 2021, Leeds successfully defended its patent against infringement. Litigation costs totaled $500,000.Required:1. Calculate amortization of the patent for 2019 and 2020.2. Prepare the journal entry to record the 2021 litigation costs.3. Calculate amortization for 2021.4. Repeat requirements 1–3 assuming that Leeds prepares its financial statements according to IFRS.arrow_forwardKatana Company purchased a patent on January 1, 2014 for P6,000,000. The original life was estimated to be 15 years. However, in December 2019, Iceberg's controller received information proving conclusively that the product protected by the Katana patent would be obsolete within five years. Accordingly, the entity decided to write off the unamortized cost of the patent over five years beginning in 2019. 5. How much would be the patent amortization for the year 2019? a. 1,200,000 b. 1,000,000 c. 800,000 d. 400,000 IAS 36 Breathless Company acquired equipment on January 1, 2018 for P5,000,000. The equipment had a 10-year useful life and no residual value. On December 31, 2019, the following information was obtained: Expected value of undiscounted cash flows Fair value estimated with in-use premise 3,600,000 3,700,000 Fair value estimated with in-exchange premise 3,500,000 6. What amount should be recognized as impairment loss for 2019? a. 300,000 b. 400,000 c. 500,000 d. Silver Company…arrow_forward
- Brazen Company purchased a patent on January 1, 2015 for P6,000,000. The original life of the patent was estimated to be 15 years. However, in December 2020, the controller received information proving conclusively that the product protected by the patent would be obsolete within four years. The entity decided to write off the unamortized portion of the patent cost over five years beginning in 2020. What is the patent amortization for 2020?arrow_forwardPresented below is selected information for Sheridan Company. Answer the questions asked about each of the factual situations. (Do not leave any answer field blank. Enter O for amounts.) 1. Sheridan purchased a patent from Vania Co. for $1,160,000 on January 1, 2018. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2028. During 2020, Sheridan determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020? The amount to be reported $ 2. Sheridan bought a franchise from Alexander Co. on January 1, 2019, for $330,000. The carrying amount of the franchise on Alexander's books on January 1, 2019, was $330,000. The franchise agreement had an estimated useful life of 30 years. Because Sheridan must enter a competitive bidding at the end of 2021, it is unlikely that the…arrow_forwardPharoah Corp., reporting under ASPE, has provided the following information regarding its intangible assets: 1. 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. 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. Pharoah incurred the following research costs in 2020: Materials and equipment $81,200 Personnel…arrow_forward
- On January 1, 2018, Laica Company purchased a patent from an original patentee for P2,400,000. The remaining life of the patent is 15 years but the useful life is only 12 years. On January 1, 2019, the entity paid P550,000 in successfully defending the patent in an infringement suit filed against the entity. On January 1, 2020, an entity acquired a competing patent for P1,500,000. The competing patent has a remaining life of 15 years but it is not used because it was intended to protect the original patent. Assume that the company is an SME. What is the carrying amount of the patent on December 31, 2020?arrow_forwardOn January 1, 2020, Cecilia Company purchased a patent from an original patentee for P2,400,000. The remaining legal life of the patent is 15 years but the useful life is only 12 years. On January 1, 2021, the entity paid P550,000 in successfully defending the patent in an infringement suit filed against the entity. On January 1, 2022, the entity acquired a competing patent for P1,500,000. The competing patent has a remaining legal life of 15 years but it is not to be used because it was intended to protect the original patent. What is the carrying amount of the patent on December 31, 2022? А. 3,150,000 B. 3,600,000 С. 3,200,000 D. 3,500,000arrow_forwardHull Inc. purchased a patent on September 1, 2020 for $ 65,000. At the time of purchase, Hull estimated that the patent's economic benefits would last until the end of 2024. Hull's fiscal year end is December 31. On April 1, 2023, Hull sold the patent to another company. Part a) Record the journal entry to record the sale, assuming Hull sold the patent for $22,000 Part b) Disregard your answer to part a). Record the journal entry to record the sale, assuming Hull sold the patent for $46,000.arrow_forward
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