TAMPOA, Jahna Kay T.

BSAc-2
AE211

EXERCISE 1
a. Goodwill is computed using the residual approach.
Cost 45,000,000
Less: XYZ net assets @ FV 35,000,000
Goodwill 10,000,000
b. Goodwill is measured by capitalizing the average excess earnings for 5 years.
The normal rate of return of a business similar to XYZ is 10%
Average earnings
Normal Earnings
XYZ net assets @ FV 35,000,000
Multiply by: Normal rate of return 10%
Average excess earnings
Multiply by: Number of Years
Goodwill
c. Goodwill is computed by capitalizing the average earnings of XYZ at 12%
Average earnings 6,000,000
Divide by: Capitalization Rate 12%
Net Assets of XYZ, including goodwill 50,000,000
Less: Net Assets of XYZ, excluding goodwill 35,000,000
Goodwill 15,000,000
d. Goodwill is computed by capitalizing the average excess earnings at 20%
Average excess earnings 2,500,000
Divide by: Capitalization Rate 10%
Goodwill 25,000,000
e. Goodwill is computed by capitalizing the average excess earnings over the
PV of 1 at 12% for 5 years (3.605)
Average excess earnings 2,500,000
Multiply by: Capitalization Rate 3.605
Goodwill 9,012,500

EXERCISE 2
DATE PARTICULARS DEBIT
20x7
Jan. 1 Research and Development cost 400,000
Cash
To record the development of the patent.

Feb. 1 Patent 240,000

Cash
To record the liscensing cost of patent.
 Dec. 31 Amortization of Patent 11,000
Patent [(240,000/20years)*11/12]
To record amortization of patent.

20x8
Jul. 1 Legal Expense 250,000
Cash
To record the cost for the successful defense of patent.

Dec. 31 Amortization of Patent 12,000

Patent (240,000/20)
To record annual amortization of patent.

20x9
Feb. 1 Patent 85,000
Cash
To record the acquisition of a competing patent.

Dec. 31 Amortization of patent* 16,583.33

Patent
To record amortization of patent.

20x10
Dec. 31 Amortization of Patent [12,000+(85,000/17)] 17000
Patent written-off 251,416.67
Patent
To record amortization and write-off of patent.

EXERCISE 3
DATE PARTICULARS DEBIT
Jan. 1 Franchise 4,000,000
Cash
Notes Payable
To record the initial franchise fee.

Dec. 31 Amortization of Franchise 400,000

Franchise
To record amortization of the franchise.

Franchise fee expense (10,000,000/10) 1,000,000

Cash
To record periodic franchise fee.
 Notes Payable* 573,291.18
Interest Expense (3,500,000*10%) 350,000
Cash
To record the first downpayment and interest expense for the year.

EXERCISE 4
1 Old Patent 400,000
Less: Amortization from 20x9-20x13 200,000
Carrying Amount of Patent as of 1/1/20x14 200,000
Add: Related Patent 250,000
Total 450,000
Less: Amortization for the year 20x14 (9 years) 50000
Carrying Amount of Patent as of 12/31/20x14 400,000

2 Initial franchise fee 500,000

Less: Impairment 100,000
Total 400,000
Less: Amortization 40,000
Carrying Amount of Franchise as of 12/31/20x14 360,000

3 Costs AFTER establishing technological feasibility

Add: Cost to produce product masters
Total
Less: Amortization
Revenue for the year 2,000,000
Divide by: Total revenue expected from software 10,000,000
Rate 0.2
Cost 150,000
Carrying amount of Software as of 12/31/20x14

EXERCISE 5
1 Cost 1,650,000
Less: Improvement debited to patent 250,000
Correct amount for Patent 1,400,000
Divide by: Life of Patent 14
Amortization 100,000

2 Cost 1,650,000
Less: Amortization(8 years)-from 1/2/20x8 to 12/31/20x15 800,000
Carrying Amount of Patent as of 12/31/20x15 850,000

3 Cost of Franchise 150,000

Less: Amortization of Franchise 30,000
 Carrying Value of Franchise as of 12/31/20x15 120,000

4 Carrying Amoount of Organizational Cost for 20x15 0

5 Goodwill
Excess of cost over assiged et asset values of the
enterprise acquired in early 20x13 600,000

EXERCISE 6
Expenditures Intangible Asset
1
2
3
4
5
6 -
7
8
9 15,000
10 -
11 -
12 62,000
13 -
14 -
Total 77,000

EXERCISE 7
1 Amortization of Patent 20,000
Amortization of Computer Software 50,000
Total Amortization of assets in 20x13 70,000

2 Impairment of Copyright
Cost
Less: Fair Value (8,000/5%)
Impairment of Tradename
Cost
Less: Fair Value (15000/5%)
Impairment of Goodwill
Carrying amount of net assets excluding goodwill
Add: Goodwill
Total Net Assets including goodwill
Less: Total net fair value of net assets with goodwill
Cash inflows for the next 25 years 200,000
Multiply by: PVF 14.0939
 Total Impairment

3 Goodwill 900,000
Less: Impairment 181,220
Carrying Amount of goodwill as of 12/31/20x13 718,780

4 Patent 20,000
Computer Software 50,000
Copyright 160,000
Tradename 300,000
Total carrying amount of intangible assets as of 12/31/20x13 530,000

EXERCISE 8 Patent
1,2 & 3 April 1 TOTAL 738,750

4 Cost
Patent 738,750
License 300,000
Trademark 150,000
Total Carryig amount of Intangible Assets

5 DATES EXPENSES
Jan. 2 349,500
Jan. 15 22,500
Dec. 31 2,625,000
Total 2,997,000

EXERCISE 9
1 Cost (7/1/20x7) 375,000
Less: Amortization for 20x7 37,500
Carrying Amount as of 1/1/20x8 337,500
Less: Recoverable Amount 112,500
Loss on Impairment on 1/1/20x8 225,000

2 Recoverable Amount 112,500

Divide by: Remaining Life 3
Amrtization for 20x9 37500

EXERCISE 10
Amortization of old patent for the first 6 months
Amortization of related patent
Origination Cost 34,000
Related Patent 32,000
Total 66,000
 Less: Amortization (1/1/20x1 to 6/30/20x5) 7,650
Total 58,350
Divide by: Life 15
Total 3890
Multiply by: Ratio 0.50
Amortization of patent for the year

EXERCISE 11 INTANGIBLE
Goodwill 150,000
Experimental cost of new product
Excess Cost over net assets of purchased subsidiary 25,000
Trademark 15,000
Cost of developing patent
Labor and materials in pproducing prototype model
Patent 25,000
TOTAL 215,000
 6,000,000

3500000
2,500,000
5
12,500,000

CREDIT

400,000

240,000
 11,000

250,000

12,000

85,000

* Amortization of Old Patent (240000/20) 12,000

16,583.33 Add: Amortization or Competing Patent [(85,000/17)*11/12] 4583.33
Total Amortization of Patent for 20x9 16,583.33

*Original Cost 240,000

Less: Amortization for 20x7 and 20x8 23,000
268,416.67 Carrying amount of Patent as of 1/1/20x9 217,000
Add: Competing Patent 85,000
Carrying amount of Patent as of 2/1/20x9 302,000
Less: Amortization for 20x19 and 20x10 (16,583.33+17,000) 33,583.33
Carrying amount of Patent as of 20x10 268,416.67

CREDIT

500,000
3,500,000

400,000

1,000,000
 * Annual Payment 923,291.18
Less: Interest expense 350,000
923,291.18 Amount to be deducted to notes payable for the current year 573,291.18

*5 years remaining life from old patent + 4 years caused by the related patent

100,000
50,000
150,000

30000
120,000
R&D Expenses
200,000
100,000
10,000
42,000
120,000
-
53,000
32,000

-
-

-
-
557,000

400,000
160000 240,000

350,000
300000 50,000

2,100,000
900,000
3,000,000

2,818,780 181,220
 471,220

Licences Trademark
300,000 150,000

Amortization Carrying Amount

92343.75 646,406
37500 262,500
18750 131,250
1,040,156

850
 1945
2,795

R&D COST

65,000

35,000
150,000

250,000