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

Answer the questions asked about each of the factual situations. (Do not leave any answer field blank. Enter O for amounts.) 1. Sandhill purchased a patent from Vania Co. for $1,190,000 on January 1, 2023. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2033. During 2025, Sandhill determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2025? The amount to be reported $ 2. Sandhill bought a franchise from Alexander Co. on January 1, 2024, for $345,000. The carrying amount of the franchise on Alexander's books on January 1, 2024, was $345,000. The franchise agreement had an estimated useful life of 30 years. Because Sandhill must enter a competitive bidding at the end of 2026, it is unlikely that the franchise will be retained beyond 2033. What amount should be…
Hips Company purchased an asset with a list price of P130,000 to be delivered on July 1, 2021 with the following payment terms:  A deposit of P26,000 is due on June 1, 2021 and cash on delivery of P26,000 is due on July 1, 2021.  Three annual payments of P26,000 starting July 1, 2022 and thereafter.  The seller waived its normal interest charge of 6% per year. The equipment is expected to last 5 years, with a residual value of P26,000. Hips has a December 31 yearend. What should be the depreciation expense for the year ended December 31, 2021
On March 1, 2020, Tebow Company purchased a patent for $158,000 cash. Although the patent gives legal protection for 19 years, the patent will be used for only 2 years. Assume straight-line amortization. Amortization per unit (Cost Res. Value)/Time = Amortization per year Amortization per year X portion of year = Amortization Journalize a) the purchase of the patent, and b) the amortization expense of the patent as of December 31, 2020. Date a b Check All Parts Description Debit Credit
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?
Teari Company purchased a machine on September 1, 2021. The purchase agreement required Teari to pay an initial fee payment of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2021. The market interest rate is 12%. The present and future value tables at 4% for four (4) periods were as follows: Present value of P 1, 0.85; Present value of an ordinary annuity of P1, 3.63; Future value of P 1, 1.17, Future value of an ordinary annuity of P1, 4.25. What is the fair value of the note on December 31, 2021.
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.
Yellow Company, a distributor of machinery, bought a machine from the manufacturer in November 2020 for P500,000. On December 30, 2020, the entity sold this machine for P750,000 under the following terms: 2% discount if paid within 30 days, 1% discount if paid after 30 days, or payabl e in full within ninetydays if not paid within the discount periods. However, the customer had the right to return this machine to Yellow Company if it was unable to resell the machine before the expiration of the ninety-day payment period, in which case the customer’s obligation to Yellow Company would be canceled. In the net sales for the year ended december 31,2020, what amount should be included for the sale of the machine? a. 750,000 b. 735,000 c. 742,500 d. 0
Kjekk Company purchased a patent for $180,000 on May 1, 2017. The patent had a remaining legal life of 15 years, but Kjekk estimates it will contribute to cash flows for only more 10 years. What is the amortization expense for the patent on December 31, 2017?
Watson Co. sold some machinery to the Finney Co. on January 2, 2009. The cash selling price would have been P473,850. Finney entered into an installment sales contract which required annual payments of P125,000, including interest at 10% over five years. The first payment was due on December 31, 2009. What amount of interest income should be included in Watson’s 2010 income statement (the second year of the contract)? A 25,845 B 12,524 C 34,885 D 39,624
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