acctg.-INTANGIBLE 2011

acctg.-INTANGIBLE 2011 - 1 PRACTICAL ACCOUNTING 1...

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PRACTICAL ACCOUNTING 1 INTANGIBLE ASSETS MULTIPLE CHOICE: 1. The following are items that could be included in the Intangible Assets: 1. Investment in a subsidiary company P1,500,000 2. Timberland 2,000,000 3. Cost of engineering activity required to advance the design of a product to the manufacturing stage 120,000 4. Lease prepayments (6 months’ rent paid in advance) 60,000 5. Cost of equipment obtained under finance lease 700,000 6. Internally generated publishing title 230,000 7. Costs incurred in the formation of the corporation 90,000 8. Operating losses incurred in the start-up of the business 560,000 9. Training costs incurred in start-up operations 80,000 10. Purchase of a franchise 1,200,000 11. Goodwill internally generated 300,000 12. Cost of testing in search for product alternatives 65,000 13. Goodwill acquired in the purchase of a business 640,000 14. Cost of developing a patent 140,000 15. Cost of purchasing a patent from an inventor 500,000 16. Legal costs incurred in securing a patent 70,000 17. Costs of a successful legal suit to protect the patent 230,000 18. Cost of conceptual formulation of possible product alternatives 160,000 19. Cost of purchasing a copyright 900,000 20. Research and development costs 340,000 21. Long-term receivables 310,000 22. Cost of developing a trademark 61,000 23. Cost of purchasing a trademark 290,000 24. Computer software for a computer-controlled machine that cannot operate without that specific software 130,000 25. Operating system of a computer 10,000 How much could be recognized as Intangible Assets? a. P3,600,000 c. P5,830,000 b. P3,740,000 d. P3,530,000 2. In connection with your audit of the Ramil Corporation’s financial statements for the year 2012 you noted the following items relative to the company’s Intangible assets. A patent was purchased from Maica Company for P4,000,000 on January 2, 2011. Ramil estimated that the remaining useful life of the patent to be 10 years. The patent was carried in Maica’s accounting records at a carrying value of P4,000,000 when Maica sold it to Ramil. During 2012, a franchise was purchased from Gloria Company for P960,000. In addition, 5% of the revenue from the franchise must be paid to Gloria. Revenue from the franchise for 2012 was P5,000,000. Ramil estimates the useful life of the franchise to be 10 years and takes full year’s amortization in the year of purchase. Ramil incurred research and development costs of P866,000 in 2012. Ramil estimates that these costs will be recouped by December 31, 2015. On January 1, 2012, Ramil, because of the recent events in the industry, estimates that the remaining life of the patent purchased on January 2, 2011, is only 5 years from January 1, 2012. Based on the above and the result of your audit, determine the following:
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acctg.-INTANGIBLE 2011 - 1 PRACTICAL ACCOUNTING 1...

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