E12-1 ( Classification Issues—Intangibles ) Presented below is a list of points that could be included in the intangible assets subdivision of the balance sheet.

Instruction manuals

( a ) Indicate which points on the list above would by and large be reported as intangible assets in the balance sheet.
13. Goodwill acquired in the purchase of a concern.
15. Cost of buying a patent from an discoverer
16. Legal costs incurred in procuring a patent.
17. Unrecovered costs of a successful legal suit to protect the patent. 23. Cost of buying a hallmark
19. Cost of buying a right of first publication.
10. Purchase cost of a franchise.
( B ) Indicate how. if at all. the points non reportable as intangible assets would be reported in the fiscal statements. 1. Investing in a subordinate company. – long term investings 2. Timberland. – PPE

3. Cost of technology activity required to progress the design of a merchandise to the fabrication phase. – research and development

4. Rent prepayment ( 6 months’ rent paid in progress ) . – prepaid rent

5. Cost of equipment obtained. – PPE

6. Cost of seeking for applications of new research findings. – R & A ; D disbursal

7. Costss incurred in the formation of a corporation. – disbursal

8. Operating losingss incurred in the start-up of a concern. – operating loss

9. Training costs incurred in start-up of new operation. – disbursal

11. Goodwill generated internally. – non enter

12. Cost of proving in hunt for merchandise options. – R & A ; D expense 14. Cost of developing a patent. – R & A ; D disbursal

18. Cost of conceptual preparation of possible merchandise options.

20. Research and development costs. – R & A ; D disbursal

21. Long-run receivables. – long term investing

22. Cost of developing a hallmark. – disbursal

( Kieso. 02/201
1. p. 698 )

E12-4 ( Intangible Amortization ) Presented below is selected information for Palmiero Company. 1. Palmiero purchased a patent from Vania Co. for $ 1. 500. 000 on January 1. 2010. The patent is being amortized over its leftover legal life of 10 old ages. run outing on January 1. 2020. During 2012. Palmiero determined that the economic benefits of the patent would non last longer than 6 old ages from the day of the month of acquisition. What sum should be reported in the balance sheet for the patent. cyberspace of accumulated amortisation. at December 31. 2012? 2010

Patents1. 500. 000
Cash1. 500. 000

2012
Amortization Expense 250. 000
Accumulated Patent Amortization 250. 000

2. Palmiero bought a franchise from Dougherty Co. on January 1. 2011. for $ 350. 000. The transporting sum of the franchise on Dougherty’s books on January 1. 2011. was $ 500. 000. The franchise understanding had an estimated utile life of 30 old ages. Because Palmiero must come in a competitory command at the terminal of 2020. it is improbable that the franchise will be retained beyond 2020. What sum should be amortized for the twelvemonth ended December 31. 2012?

1. 350. 000/6 = 225. 000 for Dec 2012

Purchase $ 350. 000
Book value $ 500. 000.

3. On January 1. 2010. Palmiero incurred organisation costs of $ 275. 000. What sum of organisation disbursal should be reported in 2012? a. Expense startup costs as incurred

4. Palmiero purchased the licence for distribution of a popular consumer merchandise on January 1. 2012. for $ 150. 000. It is expected that this merchandise will bring forth hard currency flows for an indefinite period of clip. The licence has an initial term of 5 old ages but by paying a nominal fee. Palmiero can regenerate the licence indefinitely for consecutive 5-year footings. What sum should be amortized for the twelvemonth ended December 31. 2012? a. nothing

Instruction manuals

Answer the inquiries asked about each of the factual state of affairss. E12-5 ( Correct Intangible Asset Account ) As the late appointed hearer for Hillary Corporation. you have been asked to analyze selected histories before the 6-month fiscal statements of June 30. 2012. are prepared. The accountant for Hillary Corporation references that merely one history is kept for intangible assets.

Intangible Assetss
AssetsLiabilties and Stockholders equity
4-JanResearch and development cost940. 000
5-Janlegal costs to obtain patent75. 00011-FebPrem on common stock250. 000 31-Janpayment of 7mt rent on belongings leased by hillary91. 00031-MarUnamortized bond price reduction on bonds due march 31. 203284. 000 30-Aprpromtional disbursals related to startup of business207. 000 30-Junoperatiing losingss for first 6mth 141. 000

Instruction manuals

Fix the entry or entries necessary to rectify this history. Assume that the patent has a utile life of 12 old ages. E12-12 ( Accounting for Goodwill ) Fred Graf. proprietor of Graf Interiors. is negociating for the purchase of Terrell Galleries. The balance sheet of Terrell is given in an brief signifier below. Fix the entry to enter the purchase of Terrell Galleries on Graf’s books.

E12-16 ( Accounting for R & A ; D Costs ) Margaret Avery Company from clip to clip embarks on a research plan when a particular undertaking seems to offer possibilities. In 2011. the company expends $ 325. 000 on a research undertaking. but by the terminal of 2011 it is impossible to find whether any benefit will be derived from it. Instruction manuals

( a ) What history should be charged for the $ 325. 000. and how should it be shown in the fiscal statements? a. Carry as stock list and allocate as consumed

( B ) The undertaking is completed in 2012. and a successful patent is obtained. The R & A ; D costs to finish the undertaking are $ 130. 000. The administrative and legal disbursals incurred in obtaining patent figure 472-1001-84 in 2012 entire $ 24. 000. The patent has an expected utile life of 5 old ages. Record these costs in journal entry signifier. Besides. record patent amortisation ( full twelvemonth ) in 2012

Research and development
Project130. 000
Expense130. 000

Administrative and legal disbursals
Patent 472-1001-8424. 000
Cash24. 000

Aggregate Amortization Expense
Year 201224. 000
Estimated Amortization Expense
Year 201319. 200
Year 201414. 400
Year 20159. 600
Year 20164. 800

( degree Celsius ) In 2013. the company successfully defends the patent in drawn-out judicial proceeding at a cost of $ 47. 200. thereby widening the patent life to December 31. 2020. What is the proper manner to account for this cost? Besides. record patent amortisation ( full twelvemonth ) in 2013.

Aggregate Amortization Expense
Year 201347. 200

( vitamin D ) Additional technology and consulting costs incurred in 2013 required to progress the design of a merchandise to the fabrication phase entire $ 60. 000. These costs enhance the design of the merchandise well. Discourse the proper accounting intervention for this cost. Engineering cost used to progress the design are expensed instantly as development cost in R & A ; D.

Mention
Kieso. D. E. ( 02/2011 ) . Intermediate Accounting. 14th Edition [ VitalSource Bookshelf version ] . Retrieved from hypertext transfer protocol: //online. vitalsource. com/books/9781118233641 The commendation provided is a guideline. Please look into each commendation for truth before usage.

E13-1 ( Balance Sheet Classification of Various Liabilities ) How would each of the undermentioned points be reported on the balance sheet? ( a ) Accrued holiday wage.
( B ) Estimated revenue enhancements collectible.
( degree Celsius ) Service guarantees on contraption gross revenues.
( vitamin D ) Bank overdraft.
( vitamin E ) Personal hurt claim pending.
( degree Fahrenheit ) Unpaid fillip to officers.
( g ) Deposit received from client to vouch public presentation of a contract. ( H ) Gross saless revenue enhancements collectible.
( I ) Gift certifications sold to clients but non yet redeemed. ( J ) Premium offers outstanding.
( K ) Discount on notes collectible.
( cubic decimeter ) Employee paysheet tax write-offs unremitted.
( m ) Current adulthoods of long-run debts to be paid from current assets. ( n ) Cash dividends declared but unpaid.
( O ) Dividends in arrears on preferable stock.
( P ) Loans from officers.

E13-2 ( Accounts and Notes Payable ) The following are selected 2012 minutess of Darby Corporation. Sept. 1
Purchased stock list from Orion Company on history for $ 50. 000. Darby records
purchases gross and uses a periodic stock list system. Oct. 1
Issued a $ 50. 000. 12-month. 8 % note to Orion in payment of history. Oct. 1
Borrowed $ 75. 000 from the Shore Bank by subscribing a 12-month. zero-interest-bearing $ 81. 000 note.

Instruction manuals
( a ) Prepare journal entries for the selected minutess above. ( B ) Prepare seting entries at December 31.
( degree Celsius ) Compute the entire net liability to be reported on the December 31 balance sheet for: ( 1 ) The interest-bearing note.
( 2 ) The zero-interest-bearing note.

E13-3 ( Refinancing of Short-Term Debt ) On December 31. 2012. Alexander Company had $ 1. 200. 000 of short-run debt in the signifier of notes collectible due February 2. 2013. On January 21. 2013. the company issued 25. 000 portions of its common stock for $ 36 per portion. having $ 900. 000 returns after securities firm fees and other costs of issue. On February 2. 2013. the returns from the stock sale. supplemented by an extra $ 300. 000 hard currency. are used to neutralize the $ 1. 200. 000 debt. The December 31. 2012. balance sheet is issued on February 23. 2013.

Instruction manuals

Show how the $ 1. 200. 000 of short-run debt should be presented on the December 31. 2012. balance sheet. including note revelation.

E13-8 ( Payroll Tax Entries ) The paysheet of Delaney Company for September 2012 is as follows. Entire paysheet was $ 480. 000. of which $ 140. 000 is exempt from Social Security revenue enhancement because it represented sums paid in surplus of $ 106. 800 to certain employees. The sum paid to employees in surplus of $ 7. 000 was $ 410. 000. Income revenue enhancements in the sum of $ 80. 000 were withheld. as was $ 9. 000 in brotherhood dues. The province unemployment revenue enhancement is 3. 5 % . but Delaney Company is allowed a recognition of 2. 3 % by the province for its unemployment experience. Besides. presume that the current FICA revenue enhancement is 7. 65 % on an employee’s rewards to $ 106. 800 and 1. 45 % in surplus of $ 106. 800. No employee for Delaney makes more than $ 125. 000. The federal unemployment revenue enhancement rate is 0. 8 % after province recognition.

Instruction manuals

Fix the necessary diary entries if the rewards and wages paid and the employer paysheet revenue enhancements are recorded individually.

E13-13 ( Contingencies ) Presented below are three independent state of affairss.
Answer the inquiry at the terminal of each state of affairs. 1. During 2012. Maverick Inc. became involved in a revenue enhancement difference with the IRS. Maverick’s lawyers have indicated that they believe it is likely that Maverick will lose this difference. They besides believe that Maverick will hold to pay the IRS between $ 800. 000 and $ 1. 400. 000. After the 2012 fiscal statements were issued. the instance was settled with the IRS for $ 1. 200. 000. What sum. if any. should be reported as a liability for this eventuality as of December 31. 2012? 2. On October 1. 2012. Holmgren Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Holmgren’s direction along with its advocate have concluded that it is likely that Holmgren will be responsible for amendss. and a sensible estimation of these amendss is $ 6. 000. 000.

Holmgren’s insurance policy of $ 9. 000. 000 has a deductible clause of $ 500. 000. How should Holmgren Chemical study this information in its fiscal statements at December 31. 2012? 3. Shinobi Inc. had a fabrication works in Darfur. which was destroyed in the civil war. It is non certain who will counterbalance Shinobi for this devastation. but Shinobi has been assured by governmental functionaries that it will have a definite sum for this works. The sum of the compensation will be less than the just value of the works but more than its book value. How should the eventuality be reported in the fiscal statements of Shinobi Inc. ?