acct 551 week 1 hw
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ACCT 551 Week 1 home work answersTRANSCRIPT
E 12-16
a. The full amount $325,000 should be charged to the income statements as R&D expense. An explanation of the R&D expenses should be provided in the notes to the financial statements.
b. Research and development expense 110,000
Cash/Accounts payable 110,000
Patents 16,000
Cash/Accounts payable 16,000
Patents Amortization expense 3,200*
Patents 3,200
*(16,000/5 = 3,200)
c. Patents 47,200
Cash/Accounts payable 47,200
The cost of defending the patent of 47,200 will be capitalized.
The amount of patent remaining (16,000 3,200) = 12,800
+New expense of defending the patent 47,200
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Total amount to be amortized 60,000
/ Year remaining 8 years
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Yearly amortization expense 7,500
Patents Amortization expense 7,500
Patents 7,500
d. The additional engineering and consulting cost incurred in 2015 to advance the design of a product to manufacturing state total $60,000 is a Research & Development cost. This R&D should be charged to income statement fully as R&D expense in 2015.
P 12-5
a. Goodwill = Purchase price the fair value of the identifiable assets at the time of purchase
= 3,000,000 2,750,000 = $250,000
b. No impairment loss needs to be recorded. The carrying value of Conchita Division $1,650,000 is lower than fair market value $1,850,000.
c. Fair value of the Conchita Division 1,600,000
Carrying value of the division 1,650,000
Add: Increase in fair value of PP&E 150,000
Less: Goodwill (250,000) (1,550,000)
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Implied fair value of the goodwill 50,000
Less: Carrying value of the goodwill (350,000)
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Impairment loss (300,000)
d. Loss on impairment $300,000
Goodwill $300,000
The loss on impairment should be charge on income statements as a separate line item before the subtotal income from continuing operations.