Use the following to answer questions 31-32 Last year the company had the following expenditures related to developing its trademark: General advertising costs Advertising specifically focused on trademark Legal fees to register trademark Legal fees for successful defense of new trademark Total $200,000 50,000 5,000 80,000 $335,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the trademark. Management contends that all the costs increase the value of the trademark and, therefore, should be capitalized. 31. Which of the above costs should NOT be capitalized? 32. $ What is the total cost that should be capitalized to the trademark account?

Use the following to answer questions 31-32 Last year the company had the following expenditures related to developing its trademark: General advertising costs Advertising specifically focused on trademark Legal fees to register trademark Legal fees for successful defense of new trademark Total $200,000 50,000 5,000 80,000 $335,000 During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all the above as costs of the trademark. Management contends that all the costs increase the value of the trademark and, therefore, should be capitalized. 31. Which of the above costs should NOT be capitalized? 32. $ What is the total cost that should be capitalized to the trademark account?

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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Autobots Bottling purchased for P800,000 a trademark for a very successful soft drink it markets under the name OK!, The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition with the OK!, thus suggesting the need for an impairment test. Data gathered by Autobots suggests that the useful life of trademark is still indefinite, but the cash flows expected to be generated by the trademark have been reduced either to P30,000 per year (with a probability of 80%) or to P60,000 per year (with 20% probability). The appropriate risk-free interest rate is 10%. The appropriate risk- adjusted interest rate is 5%. The loss on impairment of trademark isA. 440,000 B. 320,000 C. 200,000 D. 80,000
Santa Rosa recently purchased a new boat to help ship product overseas. The followinginformation is related to that purchase:• Purchase price $4,500,000• Cost to bring boat to production facility $25,000• Yearly insurance cost $25,000• Annual maintenance cost of $30,000• Received 8% discount on sales priceDetermine the acquisition cost of the boat, and record the journal entry needed.
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Danube, Toggle, and ConnectOn rely on various intangible assets to operate their businesses. These companies amortize the cost of these assets using the straight-line method over the following average estimated useful lives (in years), as reported in their annual reports. Type of Intangible Asset Developed Technology Danube 5.4 Trade Names 5.9 Toggle 5.6 10.1 ConnectOn 3.5 11.5 Customer Relationships 5.1 5.5 7.5 Required: 1. Based on these estimates, identify the company that uses the longest periods for amortizing most of its classes of intangible assets. Toggle Danube ConnectOn 2. Will these estimates increase or decrease that company's net income relative to its competitors? Increase Decrease
Double Island Ltd constructed a Whizbang Machine and incurred the following costs in doing so: Amounts paid to employees to build the machine $120 000 Raw materials consumed in building the machine $45 000 Depreciation of manufacturing equipment attributed to the construction of the Whizbang Machine $25 000 REQUIRED Provide the journal entries that Double Island Ltd would use to account for the construction of the asset. Assume that immediately after the journal entries in part (a) have been made, new information becomes available that indicates that the recoverable amount of the Whizbang Machine is only $160 000. Provide the adjusting journal entries
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Maxtor Technology incurred the following costs during the year related to the creation of a new type of personal computer monitor: Salaries $220,000 Depreciation on R&D facilities and equipment Utilities and other direct costs incurred for the R&D facilities Patent filing and related legal costs Payment to another company for performing a portion of the development work Costs of adapting the new monitor for the specific needs of a 125,000 66,000 22,000 120,000 80,000 customer What amount should Maxtor report as research and development expense in its income statement?