Jerely, Inc. had the following noncurrent asset account balance at December 31, 2019: Patent P1,920,000 ml240,000) 360,000 Accumulated Amortization Deferred tax asset Transactions during 2020 and other information relating to the noncurrent assets of Jerely, Inc. were as follows: a. The patent was purchased from Grey Corporation for P1,920,000 on January 1, 2018, at which date the remaining legal life was sixteen years. On January 1, 2020, Jerely determined that the useful life of the patent was only eight years from the date of acquisition. b. Deferred tax asset is provided in recognition of temporary differences between accounting and tax reporting of rent income and warranty liability. For the year ended December 31, 2020 (1) rent collected in advance decreased by P200,000, and (2) product warranty liability increased by P150,000. Jerely's income tax rate for 2020 was 35%. c. On January 3, 2020, in connection with the purchase of a trademark from Cody Corporation, the parties entered into a noncompetition agreement and a consulting contract. Jerely paid Cody P8,000,000, of which three-quarters was for the trademark and one-quarter was for Cody's agreement not to compete for a five-year period in the line of business covered by the trademark. Jerely considers the life of the trademark to be indefinite. Under the consulting contract, Jerely agreed to pay Cody P500,000 annually on January 3 for five years. The first payment was made on January 3, 2020. d. On July 1, 2020, Jerely purchased as a long-term investment P10,000,000 face value of Dell Corporation original issue of 8% bonds for P9,230,000. The bonds, which were priced to yield 10%, pay interest semiannually on January 1 and July 1, and mature on July 1, 2025.
Jerely, Inc. had the following noncurrent asset account balance at December 31, 2019: Patent P1,920,000 ml240,000) 360,000 Accumulated Amortization Deferred tax asset Transactions during 2020 and other information relating to the noncurrent assets of Jerely, Inc. were as follows: a. The patent was purchased from Grey Corporation for P1,920,000 on January 1, 2018, at which date the remaining legal life was sixteen years. On January 1, 2020, Jerely determined that the useful life of the patent was only eight years from the date of acquisition. b. Deferred tax asset is provided in recognition of temporary differences between accounting and tax reporting of rent income and warranty liability. For the year ended December 31, 2020 (1) rent collected in advance decreased by P200,000, and (2) product warranty liability increased by P150,000. Jerely's income tax rate for 2020 was 35%. c. On January 3, 2020, in connection with the purchase of a trademark from Cody Corporation, the parties entered into a noncompetition agreement and a consulting contract. Jerely paid Cody P8,000,000, of which three-quarters was for the trademark and one-quarter was for Cody's agreement not to compete for a five-year period in the line of business covered by the trademark. Jerely considers the life of the trademark to be indefinite. Under the consulting contract, Jerely agreed to pay Cody P500,000 annually on January 3 for five years. The first payment was made on January 3, 2020. d. On July 1, 2020, Jerely purchased as a long-term investment P10,000,000 face value of Dell Corporation original issue of 8% bonds for P9,230,000. The bonds, which were priced to yield 10%, pay interest semiannually on January 1 and July 1, and mature on July 1, 2025.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The carrying amount of the intangible assets as of December 31,2020 is
A) 7,400,000
B) 9,000,000
C) 9,070,000
D) 8,850,000
Transcribed Image Text:Jerely, Inc. had the following noncurrent asset account balance at December 31, 2019:
Patent
P1,920,000
ml240,000)
360,000
Accumulated Amortization
Deferred tax asset
Transactions during 2020 and other information relating to the noncurrent assets of Jerely, Inc.
were as follows:
a. The patent was purchased from Grey Corporation for P1,920,000 on January 1, 2018, at
which date the remaining legal life was sixteen years. On January 1, 2020, Jerely determined
that the useful life of the patent was only eight years from the date of acquisition.
b. Deferred tax asset is provided in recognition of temporary differences between accounting and
tax reporting of rent income and warranty liability. For the year ended December 31, 2020
(1) rent collected in advance decreased by P200,000, and (2) product warranty liability
increased by P150,000. Jerely's income tax rate for 2020 was 35%.
c. On January 3, 2020, in connection with the purchase of a trademark from Cody Corporation,
the parties entered into a noncompetition agreement and a consulting contract. Jerely paid
Cody P8,000,000, of which three-quarters was for the trademark and one-quarter was for
Cody's agreement not to compete for a five-year period in the line of business covered by the
trademark. Jerely considers the life of the trademark to be indefinite. Under the consulting
contract, Jerely agreed to pay Cody P500,000 annually on January 3 for five years. The first
payment was made on January 3, 2020.
d. On July 1, 2020, Jerely purchased as a long-term investment P10,000,000 face value of Dell
Corporation original issue of 8% bonds for P9,230,000. The bonds, which were priced to yield
10%, pay interest semiannually on January 1 and July 1, and mature on July 1, 2025.
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