1. Pharoah purchased a patent from Vania Co. for $2,700,000 on January 1, 2018. The patent is being amortized over its remaininglegal life of 10 years, expiring on January 1, 2028. During 2020, Pharoah determined that the economic benefits of the patent wouldnot last longer than 7 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net ofaccumulated amortization, at December 31, 2020?The amount to be reported2$2. Pharoah bought a franchise from Alexander Co. on January 1, 2019, for $979,000. The carrying amount of the franchise onAlexander's books on January 1, 2019, was $635,000. The franchise agreement had an estimated useful life of 20 years. BecausePharoah must enter a competitive bidding at the end of 2028, it is unlikely that the franchise will be retained beyond 2028. Whatamount should be amortized for the year ended December 31, 2020?The amount to be amortized3. On January 1, 2020, Pharoah incurred organization costs of $455,000. What amount of organization expense should be reportedin 2020?The amount to be reported2$4. Pharoah purchased the license for distribution of a popular consumer product on January 1, 2020, for $363,000. It is expectedthat this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying anominal fee, Pharoah can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the yearended December 31, 2020?The amount to be amortized$

Since you have asked multiple questions, we will solve the first question for you. If you want any…

1. Pharoah purchased a patent from Vania Co. for $2,700,000 on January 1, 2018. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2028. During 2020, Pharoah determined that the economic benefits of the patent would not last longer than 7 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020? The amount to be reported $

1. Pharoah purchased a patent from Vania Co. for $2,700,000 on January 1, 2018. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2028. During 2020, Pharoah determined that the economic benefits of the patent would not last longer than 7 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2020? The amount to be reported $

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 8P

See similar textbooks

Similar questions

Mystic Pizza Company purchased a patent from Prime Pizza Plus on January 1, 2019, for 72,000. The patent has a remaining legal life of 9 years. Prepare the journal entries to record the acquisition and the amortization for 2019, assuming Mystic Pizza amortizes its patents using the straight-line method over the life of the asset.
Petes Petroleum, Inc., an SEC registrant with a calendar year-end, is in the business of constructing and operating offs] lore oil platforms. Petes Petroleum is required legally to dismantle and remove the platforms at the end of their useful lives, which is estimated to be 10 years. On January 1, 2019, Pete constructed and began operating an offshore oil platform off the coast of Brazil. The total capitalized cost to construct the platform was 3,700,000. In addition, while the future cost of dismantling the oil platform is difficult to estimate, Pete believes there is a 40% chance that the future cost will be 1,425,000, a 40% chance it will be 1,650,000, and a 20% chance that it will cost 2,125,000. The appropriate discount rate is 12%, and Pete uses the straight-line method of depreciation. Required: 1. Prepare the journal entries that Pete should record in 2019 related to the oil platform. 2. Prepare an amortization schedule for the asset retirement obligation. 3. Next Level Prepare a table showing the effect of accounting for the asset retirement obligation on assets, liabilities, shareholders equity, and net income relative to accounting for the associated costs at the end of the assets service life when the expenditure is made.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.