A direct relationship between research and development costs and future

A direct relationship between research and

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uncertainty regarding the amount and timing of future benefits. A direct relationship between research and development costs and future revenues generally cannot be demonstrated. 3. Corporate headquarters' costs allocated to research and development would be classified as general and administrative expenses in the period incurred, because they are not clearly related to research and development activities. 4. On Clonal's statement of cash flows, the legal expenses incurred in defending the patent should be reported under investing activities in the period paid. C12-4 (AICPA adapted solution) 1. In a purchase transaction, assets are recorded at their acquisition price, which becomes the cost basis to the acquiring corporation. The book values of the assets for Felzar Company are irrelevant. 2. When a price is paid for a group of assets, the total price must be allocated to the individual assets. Because we know neither the total fair value of the tangible and other intangible assets acquired from Felzar Company nor the price to be paid by the Rothman Corporation, we cannot determine whether Rothman Corporation has any goodwill to record. The total price to be paid by the Rothman Corporation is indefinite but it may be estimated by discounting the expected receipts (1% of net sales) at the end of each of the next 5 years and adding the initial $450,000 cash payment. If the estimated purchase price exceeds the sum of the estimated fair values of the tangible and other assets purchased, then the excess may be recorded as goodwill. P13-2
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1. a. Cash received (1) Interest-bearing: $60,000 (2) Noninterest-bearing: $60,000 x 0.88 = $52,800 b. Effective interest rate (1) Interest-bearing: 12% $ 7,200 (2) Noninterest-bearing: = 13.64% $52,800 c. Interest expense for 2010 (1) Interest-bearing: $60,000 x 0.12 x 2/12 = $1,200 (2) Noninterest-bearing: $ 7,200 x 2/12 = $1,200 2. Interest - bearing Noninterest-bearing 201 0 No v. De c. 201 1 Oct . 1 31 31 31 Cash Discount on Notes Payable Notes Payable Interest Expense Discount on Notes Payable Interest Payable Interest Expense Interest Payable Discount on Note Payable Cash Notes Payable Cash 60,00 0 1,200 6,000 1,200 60,00 0 60,00 0 -- 1,200 -- 7,200 60,00 0 52,800 7,200 1,200 6,000 60,000 60,000 1,200 6,000 60,000
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P13-5 1. Cash ($1,665,400 x 1.05) 1,748,670 Sales 1,665,400 Sales Taxes Payable 83,270 Accounts Receivable ($2,820,500 x 1.05) 2,961,525 Sales 2,820,500 Sales Taxes Payable 141,025 Sales Taxes Payable 168,220 Cash 168,220 2. MAULDIN COMPANY Partial Balance Sheet December 31, 2010 Current Liabilities Sales taxes payable $ 56,075 P13-6 1. F.I.C.A. Wages Unemployment Tax Wages Johnson Long Morse Stewart Sharpe Ledbetter Totals $ 27,000 18,000 100,000* 28,000 26,000 20,000 $219,000 $ 7,00 0 7, 00 0 7, 00 0 7, 00 0 7, 00
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0 7, 000 $42, 000 *The maximum amount subject to FICA tax
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P13-6 (continued) 1. (continued) State unemployment tax $42,000 x 0.054 = $ 2,268 Federal unemployment tax $42,000 x 0.008 = 336 F.I.C.A.
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