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Intangible Asset Assignment 1. On January 1, 20x1, Roger acquired a patent from a competitor. The competitor is the original owner of the patent and has held the patent for seven years. The purchase price is Php 1,200,000. Roger Co paid a 20% downpayment upon signing the contract and issued a noninterest bearing note for the balance. The note is payable in 5 equal annual installments starting on Dec 31, 20x1. The patent has a remaining useful life of 15 years. a. b.

How much is the total initial cost of the patent? How much is the accumulated amortization that will be disclosed in Roger’s December 31, 20x2 financial statements?

2. Roger incurred the following expenditures in developing a patent: legal fees for patent registration, Php 700,000; tests to perfect the use of the patent for production processes, Php 60,000; research costs in the research laboratory, Php 210,000; and depreciation on equipment (that has alternative future uses) used in developing the patent, Php 40,000. The patent has an estimated useful life of 25 years. How much is the annual amortization? 3. Roger Co. incurred the following costs during 20x1: Engineering follow through in an early phase of production Conceptual formulation and design on possible product or process alternatives Periodic design changes to existing products Radical modification of the design of a product or process

20,000 100,000 30,000 80,000

4. Roger incurred the following costs during 20x1: Routine design changes to existing products Design of tools, jigs, molds and dies involving new technology Costs of quality control during commercial production Modification to the initial design of a prototype Laboratory research aimed at discovery of new technology Costs of changes in the design of the packaging of an existing product Amortization of other intangible assets used in R&D activities for new inventions 5. Roger incurred the following costs in 20x1: Design, construction and testing of preproduction prototypes and models Research and development services performed by Ming for Roger` Testing in search for new products or process alternatives

92,500 85,000 75,000 67,500 107,500 56,000 30,000

240,000 180,000 210,000

How much is total R&D? 6. Roger developed a trademark to distinguish its products from those of its competitors. Through advertising and other means, the company is seeking to establish significant product identification to increase future sales. The similarity between the trademark costs and other intangible and operating costs has caused some confusion over proper accounting. The following items are being treated as part of the cost of the trademark: Marketing research to study consumer tastes Design cost of trademark Legal fees of registering trademark Advertising to establish recognition of trademark Registration fee with Patent Office

400,000 1,500,000 150,000 200,000 50,000

Through renewals, the trademark is expected to have an unlimited life. How much is capitalized as trademark?

7. In January 20x1, Roger purchased a patent for a new customer product for Php 1,200,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 20x6 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Roger charge to expense during 20x6, assuming amortization is recorded at the end of each year? 8. Roger acquired an intangible asset in exchange for 10,000 ordinary shares with par value of Php10 per share. The quoted market price on the stock exchange was Php 15 per share. The intangible asset has a fair value of Php 140,000. In accordance with the PFRSs, at what amount should the intangible asset be initially recognized? 9. At yearend, Roger purchased for Php 30 per share all 200,000 of Ming Company’s outstanding ordinary shares. On this date, the carrying amount of net assets of the acquire was Php 5,000,000. The fair value of identifiable assets on this date was Php 400,000 in excess of their carrying amount. What amount of goodwill should be reported? 10. During 20x3, Roger spent Php 176,000 on research and development cost for an invention. The invention was patented on January 2, 20x4 at a nominal cost that was expensed 20x4. The patent had a legal life of 20 years and an estimated useful life of 8 years. In January 20x8, Roger paid Php 16,000 for legal fees in a successful defense of the patent. How much is the amortization expense in 20x8? 11. The following is information related to the development of a particular software package which was estimated to have a three-year useful life: Development costs prior to reaching technological feasibility Development cost after reaching technological feasibility Cost of duplicating salable product Estimated revenues over 3 year total product life Revenue in the first year of product life

400 600 900* 30,000 15,000

*This represents the entire inventory expected to be sold over the 3 year period. a. b. c. d.

How much is R&D expense? How much is amortization expense? How much is cost of goods sold? What is the total expense related to this software package to be recognized in its first year?

12. In 2008, Roger developed a new product that will be marketed in 2011. In connection, with the development of this product, the following costs were incurred in 2008: Research and development department cost Materials and supplies consumed in research Compensation paid to research consultants

95,000 25,000 30,000

It is anticipated that these costs will be recovered in 2011. What is the amount of research and development costs that Roger should record in 2008 as expense? MIAW