Problem 2. Truth Corp. is in the process of preparing its financial statements for the year ended December 31, 2020. The following represent various information about the entity's intangible assets. A. On May 1, 2020, Truth sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2023. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at May 1, 2020 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased for P3,150,000 on September 1, 2016. On that date, the remaining legal life was fifteen years, which was also determined to be the useful life. B. In 2020, Truth developed a new machine and secured a patent for it. The following expenses were incurred in developing and patenting the machine: Research and development laboratory P1,500,000 expenses Metal used in the construction of the machine Blueprints used to design the machine Legal expenses to obtain patent Wages paid for the employees' work on the research, development, and building of the machine (60% of the time was spent in actually building the machine) Expense of drawing required by the patent office to be submitted with the patent application Fees paid to the government patent office to process application 480,000 192,000 720,000 1,800,000 102,000 150,000 During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit. JAMES
Problem 2. Truth Corp. is in the process of preparing its financial statements for the year ended December 31, 2020. The following represent various information about the entity's intangible assets. A. On May 1, 2020, Truth sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2023. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at May 1, 2020 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased for P3,150,000 on September 1, 2016. On that date, the remaining legal life was fifteen years, which was also determined to be the useful life. B. In 2020, Truth developed a new machine and secured a patent for it. The following expenses were incurred in developing and patenting the machine: Research and development laboratory P1,500,000 expenses Metal used in the construction of the machine Blueprints used to design the machine Legal expenses to obtain patent Wages paid for the employees' work on the research, development, and building of the machine (60% of the time was spent in actually building the machine) Expense of drawing required by the patent office to be submitted with the patent application Fees paid to the government patent office to process application 480,000 192,000 720,000 1,800,000 102,000 150,000 During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit. JAMES
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:C. In 2020, Truth purchased a trademark and incurred the following costs in connection with the trademark:
One-time trademark purchase price
Nonrefundable taxes
Training sales personnel on the use of
the new trademark
Research expenditures associated with
the purchase of the new trademark
Legal costs incurred to register the
trademark
Salaries of the administrative personnel
P100,000
5,000
7,000
24,000
10,500
12,000
Based on the above and the result of your audit, compute for the following:
6. Gain on sale of patent
7. Cost of the patent on the machine
8. Cost of the patented machine
9. Cost of trademark
"DA, MM
Transcribed Image Text:Problem 2. Truth Corp. is in the process of preparing its financial statements for the year ended December 31, 2020.
The following represent various information about the entity's intangible assets.
A. On May 1, 2020, Truth sold a patent in exchange for a P5,000,000 non-interest bearing note due on May 1, 2023. There
was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note
of this type at May 1, 2020 was 14%. The collection of the note receivable is reasonably assured. The patent was purchased
for P3,150,000 on September 1, 2016. On that date, the remaining legal life was fifteen years, which was also determined
to be the useful life.
B. In 2020, Truth developed a new machine and secured a patent for it. The following expenses were incurred in developing
and patenting the machine:
Research and development laboratory
P1,500,000
expenses
Metal used in the construction of the
machine
Blueprints used to design the machine
Legal expenses to obtain patent
Wages paid for the employees' work
on the research, development,
and building of the machine (60%
of the time was spent in actually
building the machine)
Expense of drawing required by the
patent office to be submitted with
the patent application
Fees paid to the government patent
480,000
192,000
720,000
1,800,000
102,000
150,000
During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit.
JAMES
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