AC 302 CHAPTER 12 QUESTION AND PROBLEMS
Exercise 12 QUESTION 3
Name Date
Instructor Course
Intermediate Accounting 14th Edition by Kieso Weygandt and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E12-3 (Classification Issuesâ€â€Intangible Asset) Langrova Inc. has the following amounts included in its general ledger at December 31, 2012.
Organization costs $24,000
Trademarks $20,000
Discount on bonds payable $35,000
"Deposits with advertising agency for ads to promote goodwill
of company" $10,000
"Excess of cost over fair value of net identifiable assets of acquired
subsidiary" $75,000
"Cost of equipment acquired for research and development projects;
the equipment has an alternative future use" $90,000
"Costs of developing a secret formula for a product that is expected
to be marketed for at least 20 years" $70,000
Instructions:
"(a) On the basis of the information above, compute the total amount to be reported by Langrova for
intangible assets on its balance sheet at December 31, 2012. Equipment has alternative future
use."
Text Title Amount
Text Title Amount
Text Title Formula
"(b) If an item is not to be included in intangible assets, explain its proper treatment for reporting
purposes."
Enter text answer as appropriate here.
Enter text answer as appropriate here.
Enter text answer as appropriate here.
Enter text answer as appropriate here.
Exercise 12-6
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
E12-6 (Recording and Amortization of Intangibles) Powerglide Company, organized in 2011, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2012.
01/02/2012 Purchased patent, 8 year life $380,000
04/01/2012 Purchased goodwill, indefinite life $360,000
07/01/2012 Purchased franchise with 10 year life, $450,000
expiration date 7/1/20
08/01/2012 Payment of copyright, 5 year life $156,000
09/01/2012 Research and development costs $215,000
$1,561,000
Instructions:
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2012, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.)
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Formula
Account Title Formula
Account Title Formula
Account Title Formula
Account Title Formula
Balance of Intangible Assets as of December 31, 2010
Account Title Formula
Account Title Formula
Account Title Formula
Account Title Formula
Problem 12-2
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P12-2 (Accounting for Patents) Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.
Date: Activity: Cost:
2003-2004 Research conducted to develop precipitator $384,000
Jan. 2005 Design and construction of a prototype 87,600
March 2005 Testing of models 42,000
Jan. 2006 "Fees paid engineers and lawyers to prepare patent
application; patent granted June 30, 2006" 59,500
Nov. 2007 "Engineering activity necessary to advance the design
of the precipitator to the manufacturing stage" 81,500
Dec. 2008 "Legal fees paid to successfully defend precipitator
patent" 42,000
April 2009 "Research aimed at modifying the design of the
patented precipitator" 43,000
July 2013 "Legal fees paid in unsuccessful patent infringement
suit against a competitor" 34,000
Fields assumed a useful life of 17 years when it received the initial precipitator
patent. On January 1, 2011, it revised its useful life estimate downward to 5
remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company's year ends December 31.
Instructions:
(a) Compute the carrying value of patent No. 758-6002-1A on December 31, 2006.
Costs to obtain patent Jan. 2006 Amount
Text title Amount
Text title Formula
(b) Compute the carrying value of patent No. 758-6002-1A on December 31, 2010.
Carrying value of patent, Jan. 1, 2007 Formula
Text title Formula
Text title Formula Formula
Formula
Legal fees to defend patent Dec. 2008 Amount
Text title Formula
Text title Formula
Text title Formula Formula
Text title Formula
Text answer as appropriate.
(c) Compute the carrying value of patent No. 758-6002-1A on December 31, 2013.
Carrying value Jan. 1, 2011 Amount
Text Title Formula
Text Title Formula
Text Title Formula Formula
Text Title Formula
Text answer as appropriate.
Problem 12-5
Name: Date:
Instructor: Course:
Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield
Primer on Using Excel in Accounting by Rex A Schildhouse
P12-5 (Goodwill, Impairment) On July 31, 2012, Mexico Company paid $3,000,000
to acquire all of the common stock of Conchita Incorporated, which became a division of Mexico. Conchita reported the following balance sheet at the time of the acquisition.
Current assets $800,000 Current liabilities $600,000
Noncurrent assets $2,700,000 Long-term liabilities $500,000
Total assets $3,500,000 Stockholders’ equity $2,400,000
Total liabilities and stockholders’ equity $3,500,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was
$2,750,000 Over the next 6 months of operations, the newly purchased division experienced operating
losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2012, Conchita reports the following balance sheet information.
Current assets $450,000
Noncurrent assets (including goodwill recognized in purchase) $2,400,000
Current liabilities ($700,000)
Long-term liabilities ($500,000)
Net assets $1,650,000
It is determined that the fair value of the Conchita Division is $1,850,000 The recorded
amount for Conchita- net assets (excluding goodwill) is the same as fair value, except for property, plant,
and equipment, which has a fair value $150,000 above the carrying value.
Instructions:
(a) Compute the amount of goodwill recognized, if any, on July 31, 2012.
Text as appropriate.
Amount - Amount = Formula
(b) Determine the impairment loss, if any, to be recorded on December 31, 2012.
Enter text answer here.
(c) Assume that fair value of the Conchita Division is $1,600,000 instead of $1,850,000
Determine the impairment loss, if any, to be recorded on December 31, 2012.
Enter text as appropriate.
Text title Amount
Text title Amount
Text title Amount
Less: Account title Amount
Formula
Text title Formula
Text title Amount
Text title Formula
"(d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be
reported in the income statement."
Account title Amount
Account title Amount
Enter text answer here.
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