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REVIEWER IN INTERMEDIATE ACCOUNTINGREVIEWER IN INTERMEDIATE ACCOUNTINGProblem 169 (IAA)Problem 169 (IAA)Vanity Company showed the following balance at year-eVanity Company showed the following balance at year-end:nd:Copyright Copyright 500,000500, Deposit Deposit with with advertising advertising ag...

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REVIEWER REVIEWER IN IN INTERMEDIATE INTERMEDIATE ACCOUNTING ACCOUNTING

Problem 169 (IAA)

Vanity VanityCompany Companyshowed showedthe thefollowing following balance balance at atyear-end: year-end: Copyright Deposit with advertising agency used to promote goodwill Bond sinking fund Excess of cost over fair value of identifiable net Assets of acquired subsidiary Trademark

500,000 400,000 1,000,000 4,000,000 900,000

What total amount should be reported as as intangible intangible assets? a. 1,400,000 b. 4,500,000

c. 5,400,000 d. 5,800,000

Problem 170 (IAA)

Alcaraz AlcarazCompany Companypaid paidP5,000,000 P5,000,000to topurchase purchaseintangible intangibleassets assetswith withthe thefollowing followingf Internet domain name Order backing In-process research and development Operating permit

1,500,000 1,200,000 2,400,000 900,000

In addition, the entity spent P2,000,000 to run an an advertising advertising campaign campaign to to boost boost its its local community. What Whatamount amountshould shouldbe berecognized recognizedas as cost costof of the the in-process in-processresearch research and and developm developm 89 a. 2,400,000 c. 2,800,000 b. 2,000,000 d. 0 Problem 171 (AICPA Adapted)

Tobin TobinCompany Company incurred incurredP1,600,000 P1,600,000of ofresearch researchand anddevelopment development costs coststo todevelop develop For For which which aa patent patent was was granted grantedat at the the beginning beginning of ofcurrent current year. year.

year-end year-end the the entity entity paid paid P450 P450 000 000 for for legal legal fees in a successful defense of the paten What What is is the the total total amount amount that thatshould should be be capitalized capitalized for forthe the patent patentat at year-end? a. b.

750,000 300,000

c. 2,050,000 d. 2,350,000

What What is is the the amortization amortization expense expense for for 2016? 2016? a. 900,000 b. 200,000

c. 180,000 d. 300,000

Problem 173 (IAA)

Golden GoldenCompany Companydeveloped developedaanew newmachine machinefor formanufacturing manufacturingbaseballs. baseballs.Because Becauset is is considered considered very very valuable, valuable, the the entity entity had had itit patented. The Thefollowing followingexpenditures expenditureswere wereincurred incurredin indeveloping developingand andpatenting patentingthe themachine machine Purchase Purchase of of special special equipment equipment to to be be used used solely solely for for Development of the new machine Research Research salaries salaries and and fringe fringe benefits benefits for for engineers engineers And scientists Cost of testing prototype Legal cost for filing of patent Fees paid to government patent office Drawings Drawings required required by by patent patent office office to to be be filed filed with Patent application

1,800,000 200,000 250,000 150,000 50,000 40,000

1. What What amount amount should should be be capitalized capitalized as as cost of patent? a. 240,000 b. 540,000

c. 740,000 d. 200,000

2. What What amount amount of of research research and and development development cost should be expensed in the c year? a. 2,250,000 c. 2,490,000 b. 2,000,000 d. 1,800,000 90 Problem 174 (AICPA Adapted)

On OnJanuary January1, 1,2016, 2016,Boracay BoracayCompany Companybought boughtaatrademark trademarkfrom fromLamitan LamitanCompany Company P3,000,000. The entity retained retainedan anindependent independentconsultant consultantwho whoestimated estimatedthe thetrade trade

to be indefinite. The carrying carrying amount amount of of the the trademark trademark was was P1,500,000 P1,500,000 on on the thebook book Company. On December 31, 2016, what is the carrying carrying amount amount of of the the trademark? trademark? a. 3,000,000

c. 2,850,000

Problem 175 (IAA)

On January 1, 2016, Aim Company Companyshowed showedpatent patentof ofP1,920,000 P1,920,000with withrelated related accum accum amortization amortizationof ofP240,000. P240,000.The Thepatent patentwas waspurchased purchasedon onJanuary January1, 1,2014 2014at atwhich whichda d life is 16 years

Aim Aim Company Company paid paid Cat Cat Company Company P800,000, P800,000, of of which which three-fourths three-fourths was was for for the the trad trad one-fourth fourthwas wasfor forthe theCat CatCompany’s Company’sagreement agreementnot notto tocompete competefor foraafive five -year pe line of business covered by the trademark. trademark. Aim Aim Company Company considered considered the the life life of of the the to be indefinite. Moreover, Moreover, Aim Aim Company Company agreed agreed to to pay pay Cat CatCompany Company P50,000 P50,000 annually annually on on January January 1 year for 5 years. 1. What What is is the the carrying carrying amount amount of of intangible intangible assets assets on on January 1, 2016? a. 2,280,000 b. 2,480,000

c. 1,880,000 d. 1,680,000

2. What What is is the the total total amortization amortization of ofintangible intangible assets assets for for 2016? a. 280,000 b. 440,000

c. 320,000 d. 160,000

Problem 176 (AICPA Adapted)

On On January January 1, 1, 2016, 2016, Hart Hart Company Company signed signed an an agreement agreement to to operate as a franchisee Company Company for for an an initial initial franchise franchise fee of of P12,000,000. The The same same date, date, Hart Hart Company Company paid paidP4,000,000 P4,000,000 and and agreed agreedto topay paythe balance in fou annual annual payments payments of of P2,000,000 P2,000,000 beginning beginning January January 1, 1, 2017. 2017. Hart Hart Company Company can can barrow barrow at at 14% 14% for for aa loan loan of of this this type. type. The The present present value value factors factors aa follows: Present value of 1 at 14% for four periods

0.59

Present value of an ordinary annuity of 1 at 14% for four periods

2.91

91 What is the acquisition cost of the franchise?

a. 13,520,000 b. 12,000,000

c. 9,820,000 d. 8,720,000

Problem 177 (AICPA Adapted)

Carr CarrCompany Companyrecently recentlyacquired acquiredthat thatnow nowhas hasremaining remaininglegal legallife lifeof of40 40 years. The c initially initially had had aa 30-year 30-year useful useful life. An analysis of market market trend trend and and consumer consumer habit habit in in

What What is is the the remaining remaining useful useful life life over over which which the the entity entity can canamortize amortize the the copyright? copyright? a. 25 b. 30

c. 40 d. 0

Cash Accounts receivable Patent Property, plant and equipment Property, plant and equipment

50,000 500,000 1,000,000 0 2,000,000

50,000 500,000 1,500,000 250,000 3,000,000

Total In addition, the acquitee had liabilities totalling P2,000,000 at the time of acquisitio acquire had no other separately identifiable intangible assets. What is the goodwill arising from the acquisition? 2,700,000 b. 2,450,000

c. 4,450,000 d. 700,000

Problem 179 (IAA )

Casanova Company purchased another entity for P500,000 cash. The following carry and fair value were associated with the items acquired in this business combination Carrying amount

Accounts receivable Inventory Government contract Equipment Short-term payable

2,000,000 1,000,000 0 400,000 (2,000,000)

Net Assets

Fair value

2,000,000 500,000 1,000,000 500,000 (2,000,000) 0

The fair value associated with the acquired entity’s government contract is not base legal or contractual relationship. In addition, for obvious reason, there is no open market trading for an intangible of What is the goodwill arising from the business combination? a. 3,000,000 b. 3,600,000 Problem 180 (IAA)

c. 4,000,000 d. 0

Clever Company purchased for P4 000 000 cash all of the outstanding ordinary shar Company when Sun’s statement of financial position showed net assets of P3,200,0

On the date of acquisition, Sun’s assets and liabilities had fair value different from t amount as follows:

a. 350,000 b. 250,000

c. 750,000 d. 800,000

Problem 181 (IFRS)

Brisbane Company has recently diversified by taking over the operations of Darwin a cost of P10,000,000. Darwin manufactures and sells a cleaning cloth called the “Superswipe” which was d by Darwin’s highly trained staff.

The unique nature of the coating used on the “Superswipe” has resulted in Darwin C significant share of the South African market. As a result of the takeover, Brisbane Company acquired the following assets at fair v Land and building Production machinery Inventory Accounts receivable

3,200,000 2,000,000 1,800,000 700,000

In addition, Darwin Company owned, but had not recognized, the following: 

Trademark– “Superswipe” with fair value of P1,000,000.



Patent– Formula for the special coating with fair valuew3 of P5000,000.

What amount of goodwill should be recognized on the date of acquisition? a. 2,300,000 b. 1,300,000

c. 1,800,000 d. 800,000 93

Problem 182 (IAA)

At year-end, Bliss Company purchased the net assets of another entity for P6,000,0 date of the transaction, the acquire had P2,000,000 of liabilities. The assets of the acquire at fair value were P3,000,000 for current assets and P6,00 noncurrent assets.

a. Retained earnings should be credited for P1,000,000. b. Gain on bargain purchase should be credited for P1,000,000. c. The current assets should be reported at P3,000,000 and the noncurrent ass P5,000,000. d Negative goodwill should be credited for P1 000 000

1. What is the purchase price of the business? a. 10,000,000 b. 12,500,000

c. 15,000,000 d. 7,500,000

2. What is the amount to be paid for goodwill? a. 3,500,000 b. 7,500,000

c. 2,500,000 d. 5,000,000

Problem 184 (AICPA Adapted)

On January 1, 2014, Wayne Company signed an eight-year lease for office space. Th the option to renew the lease for an additional four-year period on or before Janua During January 2016, two years after occupying the leased premises, the entity mad improvement costing P3,600,000 and having a useful life of ten years. On December 31, 2016, the entity’s i ntention as to exercise of the renewal option is

What is the depreciation of leasehold improvement for 2016? a. 300,000 b. 360,000

c. 450,000 d. 600,000

Problem 185 (AICPA Adapted)

On January 1, 2016, Ames Company signed an eight-year lease for office space. The the option to renew the leave for an additional four-year period on or before Janua During January 2016, the entity incurred the following costs: 

P1,200,000 for general improvement to the leased premises with an estimat life of ten years. 94



P500,000 for office furniture and equipment with an estimated useful life of



P400,000 for moveable assembly line equipment with useful life of 5 years.

On December 31, 2016, the entity’s i ntention as to exercise of the renewal option is

What is the accumulated depreciation of leasehold improvement on December 31, a. 292,500 c. 170,000

Problem 186 (AICPA Adapted)

On January 1, 2014, Nobb Company signed a 12-year lease for warehouse space. Th an option to renew the lease for an additional 8-year period on or before January 1,

b. 504,000 Problem 187 (AICPA Adapted)

d. 513,000

On January 1, 2015, Bay Company acquired a land lease for 21 years with no option The lease required the lessec to construct a building in lieu of rent. The building, completed on January 1, 2016, at a cost of P8,400,000, is depreciated straight line method. At the end of the lease, the building’s estimated fair value is P4,200,000. The useful building is 25 years. What is the carrying amount of the building on December 31, 2016? ANSWER: A a. 7,980,000 b. 8,064,000

c. 8,190,000 d. 8,232,000

Problem 188 (IAA)

At the beginning of current year, Explicable Company acquired a 5-year lease on lan building from another entity at an annual rental of P1,200,000. On same date, the entity paid P2,400,000 representing rental for the first year and a rental for one year which will be applied for the last year of the lease contract. Moreover, the entity paid P2,000,000 upon signing of the contract to obtain right to Improvement and alteration were made on the building at a cost of P500,000. 1. What is the rent expensefor the current year? a. 1,200,000 b. 2,400,000

c. 3,600,000 d. 1,800,000

2. What is the amortization of leasehold for the current year? a. 500,000 b. 400,000

c. 200,000 d. 0

3. What is the depreciation of leasehold improvement for the current year? a. 500,000 b. 900,000

c. 100,000 d. 0

Problem 189 (IAA)

At the beginning of the current year, Alpha Company signed a contract whereby the to pay P3,000,000 cash plus P300,000 per month rent for an office building. The contract is for 10 year and renewable for another 10 years at a monthly rental o

a. 600,000 b. 300,000

c. 700,000 d. 0

2. What is the depreciation of leasehold improvement for current year? a. 480,000 b. 280,000

c. 180,000 d. 140,000

Problem 190 (AICPA Adapted)

Ward Company incurred the following research and development costs in the curre Equipment acquired for use in various R and D projects Depreciation on the above equipment Materials used Compensation costs of personnel Outside consulting fees Indirect costs appropriately allocated

975,000 135,000 200,000 500,000 150,000 250,000

What total amount of research and development costs should be recognized as exp current year? a. 850,000 b. 1,085,000

c. 1,235,000 d. 1,825,000

Problem 191 (IAA)

Courage Company incurred the following costs in the current year: R and D with useful life of four years in Various R and D projects Start-up costs incurred when opening a new plant Advertising expense to introduce a new product Engineering costs incurred to advance a product to full Production stage but economic viability is not yet achieved

1,800,000 4,200,000 2,100,000 1,200,000

What amount should be recorded as research and development expense? a. 1,650,000 b. 2,220,000 Problem 192 (IAA)

c. 3,000,000 d. 3,420,000

Laboratory research aimed at discovery of New knowledge Design of tools, jigs, molds and dies involving New technology Quality control during commercial production

750,000 220,000

What amount of research and development expense should be reported in the curr a. 1,200,000 c. 1,870,000 b. 1,500,000 d. 2,170,000 Problem 193 (AICPA Adapted)

Brunson Company, a major winery, begun construction of a new facility in Mindana following costs are incurred in conjunction with the with the start-up activities of th facility. Production equipment Travel costs of salariedemployees License fees Training of local employees for production and Maintenance operations Advertising costs

8,150,000 400,000 140,000 1,200,000 850,000

What portion of the organization costs should be expensed? a. 9,750,000 b. 1,600,000

c. 1,390,000 d. 0

Problem 194 (AICPA Adapted)

During the current year , Pitt Company incurred the following costs to develop and p computer software product: Completion of detailedprogram design Costs incurred for coding and testing to Establish technological feasibility Other coding costs after establishment Of technological feasibility Other testing costs after establishment Of technological feasibility Costs of producing product masters for training materials Duplication of computer software and Training materials from product masters Packaging product 1. What amount should be reported as inventory? a. 2,500,000

c. 4,000,000

1,300,000 1,000,000 2,400,000 2,000,000 1,500,000 2,500,000 900,000

2. What total amount of the costs incurred should be expensed immediately? a. 8,200,000 b. 2,300,000

c. 6,700,000 d. 4,400,000

Yellow Company spent P12,000,000 during the current year developing a new softw package. Of this amount, P4,000,000 was spent before it was at the application deve stage and the package was only to be used internally. The package was completed during the year and expected to have a four-year usefu entity has a policy of taking a full year amortization in the first year. After the development stage, an amount of P50,000 was spent on training employe the program. What total amount should be reported as an expense for the current year? a. 6,012,500 b. 6,050,000

c. 1,600,000 d. 2,000,000

Problem 196 (AICPA Adapted)

On January 1, 2016, Bitter Company had capitalized cost of P5,000,000 for a new co software product with an economic life 5 years. Sales for 2016 amounted to P3,000 The total sales of software over the economic life are expected to be P10,000,000. T of future sales cannot be measured reliably. On December 31,2016, the software had a fair value less cost of disposal of P4,500,0 What is the carrying amount of the computer software on December 31, 2016? a. 5,000,000 b. 3,500,000

c. 4,500,000 d. 4,000,000

Problem 40 (IAA)

Greece Company provided the following data for the current year: Inventory –January 1: Cost Net realizable value Net purchases Inventory –December 31: Cost

3,000,000 2,800,000 8,000,000 4,000,000

What amount should be reported as cost of goods sold? a. 7,000,000 b. 7,100,000 c 7 300 000

Historical cost Replacement cost Sales price Net realizable value Normal profit

28 Product 1

Product 2

Product 2

Pr

800,000 900,000 1,200,000 550,000 250,000

1,000,000 1,200,000 1,300,000 1,100,000 150,000

700,000 1,000,000 1,250,000 950,000 300,000

5 6 1, 3 3

What amount of loss on inventory write down should be included in cost of goods so a. b. c. d.

100,000 200,000 400,000 250,000

Problem 42 (IAA)

On the night of September 30,2016, a fire destroyed most of the merchandise inven Sonia Company. All goods were completely destroyed except for partial damaged g normally sell for P100,000 and that had an estimated net realizable value of P25,00 undamaged goods that normally sell for P60,000. Inventory, January 1 Net purchases, January 1 through September 30 Net sales, January 1 through September 30

Net sales Cost of goods

660,000 4,240,000 5,600,000

Total

2015

2014

20

9,000,000 6,750,000

5,000,000 3,840,000

3,000,000 2,200,000

1, 7

Gross income

0

What is the estimated amount of fire loss on September 30, 2016? a. b. c. d.

700,000 615,000 630,000 580,000

Problem 42 (AICPA Adapted)

process inventory After the fire a physical inventory was taken The raw materials were valued at P600,000, the finished goods at P1,000,000 and fa supplies at P100,000 on December 31,2016. The inventories on January 1 2016 consisted of the following:

29 Data for the curre...