Advanced Accounting 14th Edition
14th Edition
ISBN: 9781260726442
Author: By Joe Ben Hoyle And Thomas Schaefer And Timothy Doupnik
Publisher: Mc Grawhill Education
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Textbook Question
Chapter 3, Problem 8P
If no legal, regulatory, contractual, competitive, economic, or other factors limit the life of an intangible asset, the asset’s assigned value is allocated to expense over which of the following?
a. 20 years.
b. 20 years with an annual impairment review.
c. Infinitely.
d. Indefinitely (no amortization) with an annual impairment review until its life becomes finite.
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On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a
division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:
Current assets
$846,000
Current liabilities
$564,000
Noncurrent assets
2,538,000
Long-term liabilities
470,000
Stockholder's equity
2,350,000
Total assets
$3,384,000
Total liabilities and stockholder's equity
$3,384,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At
December 31, 2026, Pharoah reports the following balance sheet information:
Current assets
$752,000
Noncurrent assets (including goodwill recognized in purchase)
2,256,000
Current liabilities
(658,000)
Long-term liabilities
(470,000)
Net assets
$1,880,000
It is determined that the fair value of the Pharoah division is $2,068,000.
On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a
division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition:
Current assets
$846,000
Current liabilities
$564,000
Noncurrent assets
2,538,000
Long-term liabilities
470,000
Stockholder's equity
2,350,000
Total assets
$3,384,000
Total liabilities and stockholder's equity
$3,384,000
It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At
December 31, 2026, Pharoah reports the following balance sheet information:
Current assets
$752,000
Noncurrent assets (including goodwill recognized in purchase)
2,256,000
Current liabilities
(658,000)
Long-term liabilities
(470,000)
Net assets
$1,880,000
It is determined that the fair value of the Pharoah division is $2,068,000.
The following transactions involving intangible assets of Oriole Corporation occurred on or near December 31, 2025.
1.) Oriole paid Grand Company $520,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Oriole is in business.
2.) Oriole spent $654,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful.
3.) In January 2026, Oriole's application for a patent (#2 above) was granted. Legal and registration costs incurred were $247,800. The patent runs for 20 years. The manufacturing process will be useful to Oriole for 10 years.
4.) Oriole incurred $168,000 in successfully defending one of its patents in an infringement suit. The patent expires during December 2029.
5.) Oriole incurred $446,400 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of…
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Advanced Accounting 14th Edition
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