Problem No. 8 Use the following information for the next four (4) questions: AACA Corp. is in the process of preparing its financial statements for the year ended Dec. 31, 2022. The following represent various information about the entity’s intangible assets. On May 1, 2022, AACA sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2025. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at May 1, 2022 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased for P3,150,000 on Sept. 1, 2018. On that date, the remaining legal life was fifteen years, which was also determined to be the useful life. In 2022, AACA developed a new machine and secured a patent for it. The following expenses were incurred in developing and patenting the machine: Research and development laboratory expenses P1,500,000 Metal used in the construction of the machine 480,000 Blueprints used to design the machine 192,000 Legal expenses to obtain patent 720,000 Wages paid for the employees’ work on the research, development, and building of the machine (60% of the time was spent in actually building the machine) 1,800,000 Expense of drawing required by the patent office to be submitted with the patent application 102,000 Fees paid to the government patent office to process application 150,000 During 2022, AACA paid P225,000 in legal fees to successfully defend the patent against an infringement suit.
Problem No. 8
Use the following information for the next four (4) questions:
AACA Corp. is in the process of preparing its financial statements for the year ended Dec. 31, 2022.
The following represent various information about the entity’s intangible assets.
- On May 1, 2022, AACA sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2025. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at May 1, 2022 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased for P3,150,000 on Sept. 1, 2018. On that date, the remaining legal life was fifteen years, which was also determined to be the useful life.
- In 2022, AACA developed a new machine and secured a patent for it. The following expenses were incurred in developing and patenting the machine:
|
|
Research and development laboratory expenses |
P1,500,000 |
|
|
Metal used in the construction of the machine |
480,000 |
|
|
Blueprints used to design the machine |
192,000 |
|
|
Legal expenses to obtain patent |
720,000 |
|
|
Wages paid for the employees’ work on the research, development, and building of the machine (60% of the time was spent in actually building the machine) |
1,800,000 |
|
|
Expense of drawing required by the patent office to be submitted with the patent application |
102,000 |
|
|
Fees paid to the government patent office to process application |
150,000 |
During 2022, AACA paid P225,000 in legal fees to successfully defend the patent against an infringement suit.
- In 2022, AACA purchased a trademark and incurred the following costs in connection with the trademark:
|
|
One-time trademark purchase price |
P100,000 |
|
|
Nonrefundable taxes |
5,000 |
|
|
Training sales personnel on the use of the new trademark |
7,000 |
|
|
Research expenditures associated with the purchase of the new trademark |
24,000 |
|
|
Legal costs incurred to register the trademark |
10,500 |
|
|
Salaries of the administrative personnel |
12,000 |
Based on the given information and the result of your audit, answer the following (Round off present value factors to four decimal places and final answer to the nearest peso):
- How much is the gain on sale of patent?
- How much is the cost of the patent on the machine?
- How much is the cost of the patented machine?
- How much is the cost of trademark?
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