2017 amortization after recording impairment loss P15000 8 P1875 123117 book

2017 amortization after recording impairment loss

This preview shows page 21 - 25 out of 27 pages.

2017 amortization (after recording impairment loss): P15,000 ÷ 8 = P1,875 . 12/31/17 book value: P15,000 – P1,875 = P13,125 14-17. Miguel Alfonso Corporation Requirement (a) Attorney’s fees in connection with organization of the corporation P15,000 Costs of meetings of incorporators to discuss organizational activities 7,000 State filing fees to incorporate 1,000 Total organization costs P23,000 Drafting and design equipment, P10,000, should be classified as part of fixed assets, rather than as organization costs. Requirement (b) Organization Expense ............................................................................................................ 23,000 Cash (Payables) ....................................................................................................... 23,000 14-18. Jo Tan Company Requirement (a) Jo Tan Company INTANGIBLES SECTION OF STATEMENT OF FINANCIAL POSITION December 31, 2016 Patent from Francis Argante Company, net of accumulated amortization of P560,000 (Schedule 1) P1,440,000 Franchise from JC Company, net of accumulated amortization of P48,000 (Schedule 2) 432,000
Image of page 21
12-22 Solutions Manual to Accompany Applied Auditing, 2014 Edition Total intangibles P1,872,000 Schedule 1 Computation of Patent from Francis Argante Company Cost of patent at date of purchase P2,000,000 Amortization of patent for 2015 (P2,000,000 10 years) (200,000 ) 1,800,000 Amortization of patent for 2016 (P1,800,000 5 years) (360,000 ) Patent balance P1,440,000 Schedule 2 Computation of Franchise from JC Company Cost of franchise at date of purchase P 480,000 Amortization of franchise for 2013 (P480,000 10) (48,000 ) Franchise balance P 432,000 Requirement (b) Jo Tan Company Statement of Comprehensive Income Effect For the year ended December 31, 2016 Patent from Francis Argante Company: Amortization of patent for 2016 (P1,800,000 5 years) P360,000 Franchise from JC Company: Amortization of franchise for 2016 (P480,000 10) P 48,000 Payment to Reagan Company (P2,500,000 X 5%) 125,000 173,000 Research and development costs 433,000 Total charged against income P966,000 14-19. Twinkle Industries Requirement (a) Patent X Life in years 17 Life in months (12 X 17) 204 Amortization per month P150 Number of months amortized to date Year Month
Image of page 22
Substantive Tests of Intangible Assets 14-23 2013 10 2014 12 2015 12 2016 12 46 Book value 12/31/16 P23,700: (P30,600 – [46 X P 150]) Patent Y Life in years 10 Life in months (12 X 10) 120 Amortization per month P125 Number of months amortized to date Year Month 2014 6 2015 12 2016 12 30 Book value 12/31/16 P11,250: (P15,000 – [P125 X 30]) Patent Z Life in years 4 Life in months (12 X 4) 48 Amortization per month P300 Number of months amortized to date Year Month 2015 4 2016 12 16 Book value 12/31/16 P9,600: (P14,400 – [P300 X 16]) At December 31, 2016 Patent X P23,700 Patent Y 11,250 Patent Z 9,600 Total P44,550 Requirement (b) Analysis of 2017 transactions
Image of page 23
12-24 Solutions Manual to Accompany Applied Auditing, 2014 Edition 1. The P245,700 incurred for research and development should be expensed. 2. The book value of Patent Y is P11,250 and its estimated future cash flows are P6,000: (3 X P2,000) therefore Patent Y is impaired. The impairment loss is imputed as follows: Book value P11,250 Less: Present value of future cash flows 2,000 X 2.57710 5,154 Loss recognized P 6,096 Patent Y carrying amount (12/31/17) P5,154 At December 31, 2017 Patent X P21,900 (P23,700 – [12 X P150]) Patent Y 5,164 (Present value of future cash flows) Patent Z 6,000 (P9,600 – [12 X P300]) Patent AA 34,560 (P36,480 – P1,920*) Total P67,624 Patent AA amortization Life in years 9 1/2 Life in months 114 Amortization per month P320 P320 X 6 = P1,920 Patent Y: Value in Use 2,000 x 0.9259 = P1,852 2,000 x 0.8573 = 1,715 2,000 x 0.7983 = 1,597 P5,164 or 2,000 x 2.582 = P5,164 14-20.
Image of page 24
Image of page 25

You've reached the end of your free preview.

Want to read all 27 pages?

  • Fall '17
  • Solis
  • Balance Sheet, Depreciation, ........., Generally Accepted Accounting Principles, Research and Development Costs

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture