Compute for the gain on sale of patent under the following problem Among the account balance of Jeffrey Corporation at December 31, 2009 are the following:PatentP2,450,000P7,200,000Installment contract receivableRelevant transactions and other information for 2010 were as follows:a. The patent was purchased from Inventor Company for P3,150,000 on September 1, 2006. Onthat date, the remaining legal life was fifteen years, which was also determined to be the usefullife.b. The installment contract receivable represents the balance of the consideration received from thesale of a factory building to Esebie Company on March 31, 2008, for P12,000,000. Esebie, madea P3,000,000 down payment and signed a five-year 13% note for the P9,000,000 balance. Thefirst of equal annual principal payments of P1,800,000 was received on March 31, 2009 togetherwith interest to that date. The note is collateralized by the factory building with a fair value ofP10,000,000 at December 31, 2010. The 2010 payment was received on time.c. On January 2, 2010, Jeffrey purchased a trademark from Cool Corporation for P2,500,000.Jeffrey considers the life of the trademark to be indefinite.d. On May 1, 2010, Jeffrey sold the patent to Simple Company in exchange for a P5,000,000 non-interest-bearing note due on May 1, 2013. 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 1,2010 was at 14%. The present value of 1 for three periods at 14% is 0.675. The collection of thenote receivable from Simple is reasonably assured.e. On July 1, 2010, Jeffrey paid P18,800,000 for P750,000 ordinary shares of Pure Corporation,which represented a 25% investment in Pure. The fair value of all of Purs's identifiable assets netof liabilities equals their carrying amount of P64,000,000. The market price of Rure's ordinaryshare on December 31, 2010 was P26,000 per share.f. Pure reported the profit and paid dividends of:ProfitDividends per shareNoneSix months ended, 6/30/10 P5,760,000Six months ended, 12/31/10 P7,040,000P2

A patent is the granting of a property right to the inventor by a sovereign authority. This grant…

Among the account balance of Jeffrey Corporation at December 31, 2009 are the following: Patent Installment contract receivable P2,450,000 P7,200,000 Relevant transactions and other information for 2010 were as follows: that date, the remaining legal life was fifteen years, which was also determined to be the useful life. b. The installment contract receivable represents the balance of the consideration received from the sale of a factory building to Enebie Company on March 31, 2008, for P12,000,000. Eeebie, made a P3,000,000 down payment and signed a five-year 13% note for the P9,000,000 balance. The first of equal annual principal payments of P1,800,000 was received on March 31, 2009 together with interest to that date. The note is collateralized by the factory building with a fair value of P10,000,000 at December 31, 2010. The 2010 payment was received on time. e. On January 2, 2010, Jeffrey purchased a trademark from Cool Corporation for P2,500,000. Jeffrey considers the life of the trademark to be indefinite. d. On May 1, 2010, Jeffrey sold the patent to Simple Company in exchange for a P5,000,000 non- interest-bearing note due on May 1, 2013. 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, 2010 was at 14%. The present value of 1 for three periods at 14% is 0.675. The collection of the note receivable from Simple is reasonably sasured. e. On July 1, 2010, Jeffrey paid Pl18,800,000 for P750,000 ordinary shares of Pure Corporation, which represented a 25% investment in Pure. The fair value of all of Purss, identifiable assets net of liabilitien equals their carrying amount of P64,000,000. The market price of Bure'a ordinary share on December 31, 2010 was P26,000 per share. E. Pure reported the profit and paid dividends of: Profit Dividends per share Six months ended, 6/30/10 PS,760,000 Six months ended, 12/31/10 P7,040,000 None P2

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q