Daggy Company started a research and development project on a new fiber optic cable capable of greater bandwidth and full duplex voice calls on March 1, 2021. Total cost incurred before reaching technological feasibility amounted to P4,000,000 while development cost after reaching technological feasibility amounted to P5,000,000 before year end. Prior to commercial production, Daggy paid legal and registration fees amounting to P1,000,000 in filing for patent on the new product on July 1, 2021. Early in January 2022 an additional amount of P2,000,000 was incurred to develop the project to full manufacturing stage. The patent was approved in early January 2022 and valid until December 31, 2041. However, Daddy expected technological advancements will render the new product virtually obsolete by December 31, 2026. Daggy planned to develop a new product by that time and apply for a new patent for the upgraded fiber optic cable by the end of 2026. Any capitalized development cost should be amortized over the useful life of the patent. Total cost related to commercial production incurred during 2022 amounted to P30,000,000. 1) What total amount should be capitalized as cost of patent? A . 1,000,000 B. 6,000,000 C. 7,000,000 D. 5,000,000 2) What total amount should be reported as amortization of intangible assets? A . 1,600,000 B. 1,450,000 C. 1,400,000 D. 1,000,000
Daggy Company started a research and development project on a new fiber optic cable capable of greater
bandwidth and full duplex voice calls on March 1, 2021. Total cost incurred before reaching technological
feasibility amounted to P4,000,000 while development cost after reaching technological feasibility amounted
to P5,000,000 before year end.
Prior to commercial production, Daggy paid legal and registration fees amounting to P1,000,000 in filing for
patent on the new product on July 1, 2021. Early in January 2022 an additional amount of P2,000,000 was
incurred to develop the project to full manufacturing stage. The patent was approved in early January 2022
and valid until December 31, 2041.
However, Daddy expected technological advancements will render the new product virtually obsolete by
December 31, 2026. Daggy planned to develop a new product by that time and apply for a new patent for the
upgraded fiber optic cable by the end of 2026. Any capitalized development cost should be amortized over
the useful life of the patent. Total cost related to commercial production incurred during 2022 amounted to
P30,000,000.
1) What total amount should be capitalized as cost of patent?
A
.
1,000,000 B. 6,000,000 C. 7,000,000 D. 5,000,000
2) What total amount should be reported as amortization of intangible assets?
A
.
1,600,000 B. 1,450,000 C. 1,400,000 D. 1,000,000
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