April 1, 2020, Roddick Company incurred $480,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $252,000, is deemed worthless. Required: Prepare the journal entries needed at the date of the transaction.
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April 1, 2020, Roddick Company incurred $480,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $252,000, is deemed worthless.
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- After years of experience, Dilcort Company reasonably estimated that a loss from a pending lawsuit was probable at September 30 of the current year. Dilcort Company estimated that the loss would amount to 57,500. Prepare the journal entry, if any, to record the lawsuit at its September 30 year-end.Lee Manufacturing Corporation was incorporated on January 3, 2018. The corporations financial statements for its first years operations were not examined by a CPA. You have been engaged to examine the financial statements for the year ended December 31, 2019, and your examination is substantially completed. Lees trial balance at December 31, 2019, appears as follows: The following information relates to accounts that may vet require adjustment: 1. Patents for Lees manufacturing process were acquired January 2, 2019, at a cost of 68,000. An additional 17,000 was spent in December 2019 to improve machinery covered by the patents and charged to the Patent account. Depreciation on fixed assets has been properly recorded for 2019 in accordance with Lees practice which provides a full years depreciation for property on hand June 30 and no depreciation otherwise. Lee uses the straight-line method fix all depreciation and amortization and amortizes its patents over their legal life. 2. On January 3. 2018, Lee purchased licensing Agreement No. 1, which was believed to have an indefinite useful life. The balance in the licensing Agreement No. 1 account includes its purchase price of 48,000 and costs of 2,000 related to the acquisition. On January 1, 2019, Lee purchased licensing Agreement No. 2, which has a life expectancy of 10 years. The balance in the Licensing Agreement No. 2 account includes its 48,000 purchase price and 2,000 in acquisition costs, but it has been reduced by a credit of 1,000 for the advance collection of 2020 revenue from the agreement. In late December 2018, an explosion caused a permanent 60% reduction in the expected revenue-producing value of licensing Agreement No. 1, and in January 2020 a flood caused additional damage that rendered the agreement worthless. 3. The balance in the Goodwill account includes (a) 8,000 paid December 30, 2018, for newspaper advertising for the next 4 years following the payment, and (b) legal costs of 16,000 incurred for Lees incorporation on January 3, 2018. 4. The Leasehold Improvements account includes (a) the 15,000 cost of improvements with a total estimated useful life of 12 years, which Lee, as tenant, made to leased premises in January 2018; (b) movable assembly line equipment costing 8,500 that was installed in the leased premises in December 2019; and (c) real estate taxes of 2,500 paid by Lee in 2019, which under the terms of the lease should have been paid by the land-lord. Lee paid its rent in full during 2019. A 10-year nonrenewable lease was signed January 3, 2018, fix the leased building that Lee used in manufacturing operations. 5. The balance in the Organization Costs account includes costs incurred during the organizational period. Required: Prepare a worksheet (spreadsheet) to adjust accounts that require adjustment and prepare financial statements. Formal adjusting journal entries and financial statements are not required. No intangible assets are impaired at the end of 2019. Ignore income taxes.Steel Magnolia Incorporated purchased a trademark 7 years ago for 275,000. Steel Magnolia believed the trade-mark would have an indefinite life. At the end of 2020, the corporation believes the fair value of the trademark is 189,000. Record the impairment loss for Steel Magnolia.
- At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.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.At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial reporting purposes, the asset has a 4-year life with no residual value and is depreciated by the straight-line method beginning in 2019. For tax purposes, the asset is depreciated under MACRS using a 5-year recovery period. Prior to 2019, Conley had no deferred tax liability or asset. The difference between depreciation for financial reporting purposes and income tax purposes is the only temporary difference between pretax financial income and taxable income. The current income tax rate is 30%, and no change in the tax rate has been enacted for future years. In 2019 and 2020, taxable income will be higher or lower than financial income by what amount?
- C. April 1, 2020, Roddick Company incurred $480,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $252,000, is deemed worthless. Required: Prepare the journal entries needed at the date of the transaction.During 2021, Angela Inc. was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision on December 31, 2021. Subsequently on March 15, 2022, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party the sum of P3,500,000. The financial statements were prepared by management on February 15, 2022 and approved by the board of directors on March 31, 2022. What amount should be adjusted on December 31, 2022 in relation to this event?A. 1,000,000B. 1,500,000C. 500,000D. 2,000,000During 2018, Rosanna Company was sued by a competitor for P5,000,000 for infringement of a patent. Based on the advice of the legal counsel, the entity accrued the sum of P3,000.000 as a provision on December 31, 2018. Subsequently, on March 15, 2019, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. The financial statements were prepared by management on February 15, 2019 and approved by the board of directors on March 31, 2019. What amount should be adjusted on December 31, 2018 in relation to this event?
- During 2023, Lowry Company was used by a competitor for P5,000,000 infringement suit of a trademark. Based on the legal counsel’s advice, Lowery accrued the sum of P3,000,000 as a provision. On February 15, 2024, the Supreme Court decided in favor of the party alleging the infringement and ordered the defendant to pay the aggrieved party a sum of P3,500,000. The financial statements of Lowry were approved by the BOD for issue on February 20, 2024. What amount should the Company accrue as provision for the year ended December 31, 2023?On January 2, 2021, David Corporation purchased a patent for $500,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January 2023, the company incurred legal fees of $45,000 in successfully defending a patent infringement suit. The successful defense did not change the company’s estimate of useful life. Required:Prepare journal entries related to the patent for 2021, 2022, and 2023. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the purchase of the patent. Record amortization of the patent for the year 2021. Record amortization of the patent for the year 2022. Record costs of successfully defending the patent infringement suit. Record amortization of the patent for the year 2023.In May 2021, Cruiser Company filed suit against Stallman, Inc. seeking P850,000 damages for patent infringement. A court verdict in November 2021 awarded Cruiser P600,000 in damages, but Stallman's appeal is not expected to be decided before 2021. Cruiser's counsel believes it is probable but not virtually certain that Cruiser will be successful against Stallman for an estimated amount in the range between P300,000 and P450,000, with P400,000 considered the most likely amount. What amount should Cruiser record as a contingent asset from lawsuit in the year ended December 31, 2021? None 300,000 400,000 600,000