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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

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:
Patent
P2,450,000
P7,200,000
Installment contract receivable
Relevant 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. On
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 Esebie Company on March 31, 2008, for P12,000,000. Esebie, 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.
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 the
note 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 net
of liabilities equals their carrying amount of P64,000,000. The market price of Rure's ordinary
share on December 31, 2010 was P26,000 per share.
f. Pure reported the profit and paid dividends of:
Profit
Dividends per share
None
Six months ended, 6/30/10 P5,760,000
Six months ended, 12/31/10 P7,040,000
P2
Transcribed Image Text:Among the account balance of Jeffrey Corporation at December 31, 2009 are the following: Patent P2,450,000 P7,200,000 Installment contract receivable Relevant 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. On 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 Esebie Company on March 31, 2008, for P12,000,000. Esebie, 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. 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 the note 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 net of liabilities equals their carrying amount of P64,000,000. The market price of Rure's ordinary share on December 31, 2010 was P26,000 per share. f. Pure reported the profit and paid dividends of: Profit Dividends per share None Six months ended, 6/30/10 P5,760,000 Six months ended, 12/31/10 P7,040,000 P2
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Continuous and Computer Assisted Audit Techniques (CAAT)
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education