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Caffucino Co. acquired the following assets at the beginning of 2019:
a. Paper back copyright to a best seller novel in exchange for 15,000 shares of
Caffucino Co. P100 par ordinary shares. The stock is selling at P225 per share.
b. A fast-food franchise exchange for one hectare of prime real estate. Franchises
of this type are selling for P20,000,000 cash. The land was purchased 10 years
ago for P5,000,000. The franchise has unlimited life if the company maintains the
quality standard of the franchisor.
c. A patent was purchased from the Swift Company for P2,500,000 on January 1,
2019. At that time, Caffucino estimated the remaining life to be 10 years. The
patent was carried on Swift’s book at P150,000 when it sold the patent.
Determine the cost to be recorded for each of the intangible assets acquired.
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- Korean Short Ribs Company sold a tract of land with carrying amount of P3,000,000 to Instant Pot Corp. on July 1, 2021. P1,200,000 was collected on the date of sale, and the balance of P2,800,000 is collectible in four equal annual installments of P902,500 consisting of principal and 11% interest on the unpaid balance. The first installment is due on July 1, 2022. What amount related to the notes receivable shall be classified as current assets on December 31, 2022? a. P594,500 b. P781,198 c. P659,895 d. P902,500Korean Short Ribs Company sold a tract of land with carrying amount of P3,000,000 to Instant Pot Corp. on July 1, 2021. P1,200,000 was collected on the date of sale, and the balance of P2,800,000 is collectible in four equal annual installments of P902,500 consisting of principal and 11% interest on the unpaid balance. The first installment is due on July 1, 2022. What amount related to the notes receivable shall be classified as current assets on December 31, 2022?Korean Short Ribs Company sold a tract of land with carrying amount of P3,000,000 to Instant Pot Corp. on July 1, 2021. P1,200,000 was collected on the date of sale, and the balance of P2,800,000 is collectible in four equal annual installments of P902,500 consisting of principal and 11% interest on the unpaid balance. The first installment is due on July 1, 2022. What amount related to the notes receivable shall be classified as current assets on December 31, 2022?Required to answer. Single choice.
- Cathymae Company acquired two items of machinery as follows:• On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a noninterest bearing note requiring four payments of P500,000. The first payment was made on December 31, 2020, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the repair cost amounted to P30,000.• On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year, noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing, Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12% for 4 years is 0.64.What is the total cost of the two machines?Cathymae Company acquired two items of machinery as follows: • On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a noninterest bearing note requiring four payments of P500,000. The first payment was made on December 31, 2020, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the repair cost amounted to P30,000. • On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year, noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing, Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12% for 4 years is 0.64. What is the total cost of the two machines?On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a fair value of $160,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $257,682. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $230,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Blossom Company for the two purchases on January 1, 2020. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
- DEE Inc. purchased an equipment on March 31, 2019. The selling price of the asset is equal to its fair value at $1,400,000. The entity acquired the equipment by issuing 1,000 $1,000 8% bonds, currently quoted at 103. At how much shall the equipment be initially measured? A. $1,030,000 B. $1,400,000 C. $970,000 D. $1,000,000Grand Champion Inc. purchased America’s Sweethearts Corporation on January 1, 2019. At the time, America’s Sweethearts had the following assets and liabilities (stated at fair value): Cash $62,000 Accounts receivable 138,000 Inventory 185,000 Property, plant, and equipment 300,000 Patent 65,000 Accounts payable 200,000 Notes payable 325,000 Grand Champion paid $900,000 for America’s Sweethearts. Assume that America’s Sweethearts is a reporting unit of Grand Champion. At the end of 2020, America’s Sweethearts has a fair value of $720,000 and a book value of $850,000, which includes any goodwill recorded. Of this fair value, $350,000 is attributable to identifiable assets net of (or identifiable net assets) liabilities. Required: Calculate the impairment loss of goodwill (if any) and record the appropriate journal entry.Cubao Short Ribs Company sold a tract of land with carrying amount of $3,000,000 to Anonas Pot Corp. on July 1, 2021. $1,200,000 was collected on the date of sale, and the balance of $2,800,000 is collectible in four equal annual installments of $902,500 consisting of principal and 11% interest on the unpaid balance. The first installment is due on July 1, 2022. What amount related to the notes receivable shall be classified as current assets on December 31, 2022?
- . The following information pertains to Best Food (BF) Company’s intangible assets: a. On January 1, 2020, BF signed an agreement to operate as a franchisee of Macky’s Food Chain for an initial franchise fee of P1,500,000. Of this amount, P300,000 was paid when the agreement was signed and the balance is payable in 4 annual payments of P300,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020 of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is P874,000. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. BF’s revenue from the franchise for 2020was P19 million. BF estimates the useful life of the franchise to be 10 years. b. BF incurred P1,300,000 of experimental and developmental costs in its laboratory to develop a patent which was granted on January 2,…On January 1, 2025, Sunland Company makes the two following acquisitions. 1. Purchases land having a fair market value of $860,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,263,622. 2. Purchases equipment by issuing a 5%, 9-year promissory note having a maturity value of $350,000 (Interest payable annually on January 1). The company has to pay 9% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Sarasota Company for the two purchases on January 1, 2025. (b) Record the interest at the end of the first year on both notes using the effective-interest method.Kervin Company acquired three items of machinery as follows: > During 2022, the entity purchased a machine for P500,000 down and four monthly installments of P1,250,000. The cash price of the machine was P4,700,000 On January 1, 2022, the entity purchased a machine for P2,000,000 in exchange for a noninterest bearing note requiring four payments of P500,000. The first payment was made on January 1, 2022. The rate of interest for this note at the date of issuance was 10%. The present value of an ordinary annuity of 1 at 10% is 3.17 for four periods. The present value of an annuity of 1 in advance at 10% is 3.49 for four periods. > On January 1, 2022, the entity acquired a machine by issuing a four-year, non-interest bearing note for P2,000,000. The note is due on January 1, 2026. The entity has a 10% interest for this type of note. The present value of 1 at 10% for 4 years is 0.68. What is the total cost of the three machines? A. 7,645,000 В. 7,805,000 С. 8,505,000 D. 8,605,000
