Zurich Manufacturing Company acquired three patents in August 2019. The patents have different useful life as indicated in the following schedule: Remaining Useful Life 8 years 3 years 10 years Cost Patent A P125,000 Patent B 72,000 Patent C 256,250 Patent C is believed to be uniquely useful as long as the company retains the right to use it. On June 30, 2020, the company unsuccessfully attempted to defend Its right to Patent B. Legal fees of P17,500 were incurred in this action. The company's policy is to take full year amortization in the year of acquisition and no amortization in the year of derecognition using straight-line method. The company reports on a calendar-year basis. How much is the amortization of the patent for the year 2020?

Zurich Manufacturing Company acquired three patents in August 2019. The patents have different useful life as indicated in the following schedule: Remaining Useful Life 8 years 3 years 10 years Cost Patent A P125,000 Patent B 72,000 Patent C 256,250 Patent C is believed to be uniquely useful as long as the company retains the right to use it. On June 30, 2020, the company unsuccessfully attempted to defend Its right to Patent B. Legal fees of P17,500 were incurred in this action. The company's policy is to take full year amortization in the year of acquisition and no amortization in the year of derecognition using straight-line method. The company reports on a calendar-year basis. How much is the amortization of the patent for the year 2020?

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 13E

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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.
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.
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During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.
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