Chapter_12_Problem_solutions - PROBLEM 12-1 Franchises....

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PROBLEM 12-1 Franchises. .................................................................... 48,000 Prepaid Rent. ................................................................. 24,000 Retained Earnings (Organization Costs of $6,000 in 2009). .......................................................... 6,000 Retained Earnings ($16,000 – $6,000). ....................... 10,000 Patents ($84,000 + $12,650). ........................................ 96,650 Research and Development Expense ($75,000 + $160,000). ................................................. 235,000 Goodwill. ........................................................................ 278,400 Intangible Assets. ................................................ 698,050 Franchise Amortization Expense ($48,000 ÷ 8). ........ 6,000 Retained Earnings ($48,000 ÷ 8 X 6/12). ..................... 3,000 Franchises. ........................................................... 9,000 Rent Expense ($24,000 ÷ 2). ........................................ 12,000 Retained Earnings ($24,000 ÷ 2 X 3/12). ..................... 3,000 Prepaid Rent. ....................................................... 15,000 Patent Amortization Expense. ..................................... 9,170 Patents. ................................................................. 9,170 ($84,000 ÷ 10) + ($12,650 X 7/115) Note : No amortization of goodwill; goodwill should be tested for impairment on at least an annual basis in future periods.
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PROBLEM 12-2 (a) Costs to obtain patent Jan. 2004. .................. $59,500 2004 amortization ($59,500 ÷ 17). ................... (3,500 ) Carrying value, 12/31/04. ................................. $56,000 All costs incurred prior to January 2004 are related to research and development activities and were expensed as incurred in accordance with GAAP. (b) 1/1/05 carrying value of patent. ..................... $56,000 2005 amortization ($59,500 ÷ 17). ................. $3,500 2006 amortization. .......................................... 3,500 (7,000 ) 49,000 Legal fees to defend patent 12/06. ................ 42,000 Carrying value, 12/31/06. ............................... 91,000 2007 amortization ($91,000 ÷ 14). ................. 6,500 2008 amortization. .......................................... 6,500 (13,000 ) Carrying value, 12/31/08. ............................... $78,000 The costs incurred in 2005 and 2007 are related to research and development activities and are expensed as incurred. (c) 1/1/09 carrying value. ..................................... $78,000 2009 amortization ($78,000 ÷ 5). .................... $15,600 2010 amortization. .......................................... 15,600 2011 amortization. .......................................... 15,600 (46,800 ) Carrying value, 12/31/11. ............................... $31,200 The legal costs in 2011 were expensed because the suit was unsuccessful.
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PROBLEM 12-3 (a) SANDRO CORPORATION Intangible Assets December 31, 2010 Franchise, net of accumulated amortization of $5,870
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This note was uploaded on 06/19/2011 for the course ACCT 505 ACCT 505 taught by Professor Jumalon during the Spring '09 term at Keller Graduate School of Management.

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Chapter_12_Problem_solutions - PROBLEM 12-1 Franchises....

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