Palmiero purchased the license for the distribution of a popular consumer product on January 1, 2010, for $150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Palmiero can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2010?

Palmiero purchased the license for the distribution of a popular consumer product on January 1, 2010, for $150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Palmiero can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2010?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

See similar textbooks

Similar questions

4. Sheridan purchased the license for distribution of a popular consumer product on January 1, 2020, for $146,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Sheridan can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2020? The amount to be amortized _______
Truffle Inc. acquired a patent on January 1, 2015 for $7,800,000. It was expected to have a 10 year life and no residual value. Truffle uses straight-line amortization for its patents. On December 31, 2018, the expected future cash flows from the patent are $518,000 per year for the next six years. The present value of these cash flows, discounted at Truffle’s market interest rate, is $2,120,000. What amount, if any, of impairment loss will be reported on Truffle’s 2018 income statement?
On January 1, 2024, Sheridan Ltd. leased a machine from Carla Vista Equipment Ltd. The machine had cost Carla Vista $416,500 to manufacture, and would normally have sold for about $595,000. The lease was for 10 years and requires equal monthly payments of $6,490, which reflects an annual interest rate of 8%. While the machine is expected to have a total useful life of 12 years, Sheridan’s management plans to return it to Carla Vista at the end of the 10-year lease. Sheridan’s management has also determined that the present value of the minimum lease payments was $534,915 at the time the lease was entered into. A.Calculate the impact that the lease will have in the first month on Sheridan’s statement of financial position. (Round answers to 0 decimal places, e.g. 125.) Right-of-use asset at the end of January. $______:1 Lease liability at the end of January $______:1 B. Calculate the impact that the lease will have in the first month on Sheridan’s statement of income.…
Isla Innovations purchased a patent on 1 August 2020 for $360,000. The economic benefits were expected to last 10 years, but the patent's legal life was 20 years. Also, during 2020/21, Isla incurred research and development costs of $180,000. What is the carrying amount of the patent on 31 July 2021?
Acme purchases a new delivery truck making a cash payment of $10,000, a $12,000 trade-in on the old delivery truck and enters into a 5-year loan for the balance, requiring yearly payments of $6,000 each. The interest rate on the loan is 4% and the first payment is due at date of sale. What amount should Acme capitalize for the purchase of the delivery truck?
Gold Inc. sold the rights to use one of its patented processes that will result in cash receipts of $2,500 at the end of each of the next four years and a lump sum receipt of $4,000 at the end of the fifth year. The total present value of these payments if interest is at 9% is: Choose the closest answer. A) $14,000. B) $11,468. C) $12,100. D) $10,699. PVA 9% 4 pds 3.23972, PVA 9% 5 pds 4,58720 PV 1 9% 4 pds .72451 . PV 1 % 5 pds .64993
A company buys an oil rig for $2,400,000 on January 1, 2018. The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $609,000 (present value at 12% is $196,080). 12% is an appropriate interest rate for this company. What expense should be recorded for 2018 as a result of these events?
On January 1, 2020, Blessed Company purchased a Patent for P280,000. The asset has a legal life of 10 years but due to rapidly changing technology, Blessed estimates a useful life of only 7 years. On January 1, 2022, Blessed is uncertain that the process can actually be made economically feasible, and decides to write down the patent. The future cash inflows expected from the patent will be P40,000 per year for the remaining life of the patent. The present value of these cash flows, discounted at 12% market interest rate, is P144,200. The fair value less cost to sell is P130,000.
Crane Manufacturing Company acquired a patent on a manufacturing process on January 1, 2020 for $5550000. It was expected to have a 10 year life and no residual value. Crane uses straight-line amortization for patents. On December 31, 2021, the future cash flows expected from the patent were $510000 per year for the next eight years. The present value of these cash flows, discounted at Crane's market interest rate, is $2675000. At what amount should the patent be carried on the December 31, 2021 balance sheet? $4080000. $5550000. $4440000. $2675000.
Oscar Company acquired a patent on a manufacturing process on January 1, 2015 for $5,100,000. It was expected to have a 12 year life and no residual value. Oscar uses straight-line amortization for patents. On December 31, 2016, the expected future cash flows from the patent are $387,500 per year for the next ten years. The present value of these cash flows, discounted at Oscar’s market interest rate, is $3,050,000. At what amount should the patent be carried on the December 31, 2016 balance sheet?
Protection Company develops a patent on a new fingerprint security technology. On January 1, 2018, this patent is registered for a cost of $30,000,000 for a period of 10 years. The company does not expect this technology to be obsolete over at least the next 15 years and intends to use it over this period. At the end of 2020, the fair value of the patent is $15,000,000. The discounted value of future cash flows (value-in-use) is $16,000,000. The Company adopts the cost model. 1. What will the cost of patent be? 2. What will the useful life be? Justify your answer. 3. Prepare the entries for 2018, 2019 and 2020. Please show the workings. Dont provide handwritten or image based answers thank you
American Food Services, Incorporated, acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2024. In payment for the $5.3 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%. Questions: Prepare the journal entry for American Food Services’ purchase of the machine on January 1, 2024. Prepare an amortization schedule for the four-year term of the installment note. Prepare the journal entry for the first installment payment on December 31, 2024. Prepare the journal entry for the third installment payment on December 31, 2026.