Clegane Company had the following acquisitions of intangible assets in 2022: Franchise On January 31, 2022, Clegane signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an initial franchise of P780,000. Of this amount, P300,000 was paid when the agreement was signed and the balance was payable in four annual payments of P120,000 each, beginning January 31, 2023. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The implicit rate for loan of this type is 12%. The agreement also provides the 1.5% of the revenue from the franchise must be paid to the franchisor annually. Clegane’s revenue from the franchise in 2022 was P9,500,000. Clegane estimates the useful life of the franchise to be ten years. At the end of 2022, the franchise recoverable amount was P610,000. Trademark On March 1, 2022 Clegane purchased for P400,000 a trademark for a very successful soft drink it markets under the name PowPow! The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition with the PowPow! product, thus suggesting the need for an impairment test. Data gathered by the entity suggests that the useful life of the trademark is still indefinite, but the cash flows expected to be generated by the trademark have been reduced either to P22,000 per year (with a probability of 60%) or to P33,000 per year (with 40% probability). The appropriate risk-free interest rate is 7%. The appropriate risk-adjusted interest rate is 12%. What is the total carrying value of intangible assets – net reported in its December 31, 2022, statement of financial position?
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Clegane Company had the following acquisitions of intangible assets in 2022:
Franchise
On January 31, 2022, Clegane signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an initial franchise of P780,000. Of this amount, P300,000 was paid when the agreement was signed and the balance was payable in four annual payments of P120,000 each, beginning January 31, 2023. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The implicit rate for loan of this type is 12%. The agreement also provides the 1.5% of the revenue from the franchise must be paid to the franchisor annually. Clegane’s revenue from the franchise in 2022 was P9,500,000. Clegane estimates the useful life of the franchise to be ten years. At the end of 2022, the franchise recoverable amount was P610,000.
Trademark
On March 1, 2022 Clegane purchased for P400,000 a trademark for a very successful soft drink it markets under the name PowPow! The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition with the PowPow! product, thus suggesting the need for an impairment test. Data gathered by the entity suggests that the useful life of the trademark is still indefinite, but the cash flows expected to be generated by the trademark have been reduced either to P22,000 per year (with a probability of 60%) or to P33,000 per year (with 40% probability). The appropriate risk-free interest rate is 7%. The appropriate risk-adjusted interest rate is 12%.
What is the total carrying value of intangible assets – net reported in its December 31, 2022,
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