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. 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. 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 expenses P1,500,000 Metal used in the construction of the machine 480,000 Blueprints used to design the machine 192,000 Legal expenses to obtain patent 720,000 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) 1,800,000 Expense of drawing required by the patent office to be submitted with the patent application 102,000 Fees paid to the government patent office to process application 150,000 During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit. In 2020, Truth purchased a trademark and incurred the following costs in connection with the trademark: One-time trademark purchase price P100,000 Nonrefundable taxes 5,000 Training sales personnel on the use of the new trademark 7,000 Research expenditures associated with the purchase of the new trademark 24,000 Legal costs incurred to register the trademark 10,500 Salaries of the administrative personnel 12,000 What is the cost of trademark?

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. 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. 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 expenses P1,500,000 Metal used in the construction of the machine 480,000 Blueprints used to design the machine 192,000 Legal expenses to obtain patent 720,000 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) 1,800,000 Expense of drawing required by the patent office to be submitted with the patent application 102,000 Fees paid to the government patent office to process application 150,000 During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit. In 2020, Truth purchased a trademark and incurred the following costs in connection with the trademark: One-time trademark purchase price P100,000 Nonrefundable taxes 5,000 Training sales personnel on the use of the new trademark 7,000 Research expenditures associated with the purchase of the new trademark 24,000 Legal costs incurred to register the trademark 10,500 Salaries of the administrative personnel 12,000 What is the cost of trademark?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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.

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.
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 expenses	P1,500,000
	Metal used in the construction of the machine	480,000
	Blueprints used to design the machine	192,000
	Legal expenses to obtain patent	720,000
	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)	1,800,000
	Expense of drawing required by the patent office to be submitted with the patent application	102,000
	Fees paid to the government patent office to process application	150,000

During 2020, Truth paid P225,000 in legal fees to successfully defend the patent against an infringement suit.

In 2020, Truth purchased a trademark and incurred the following costs in connection with the trademark:

	One-time trademark purchase price	P100,000
	Nonrefundable taxes	5,000
	Training sales personnel on the use of the new trademark	7,000
	Research expenditures associated with the purchase of the new trademark	24,000
	Legal costs incurred to register the trademark	10,500
	Salaries of the administrative personnel	12,000

What is the cost of trademark?

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