ACCOUNTI

NGFORI
NTANGI
BLEASSETS

AnI
ntangi
bleasset–i
sani
dent
if
iabl
enon-
monet
aryassetwi
thoutphy
sical
appear
ance.

Exampl
esar
e:Pat
ent
s,Copy
right
s,Fr
anchi
se,
Trademar
ks,
Licenses,
Comput
ersof
twar
e,

Int
angi
bleassetmaybeacqui r
ed:
1.byPurchase
2.i
nabusi nesscombinat
ion
3.i
nter
nall
ygeneratedint
angibl
easset
4.bywayofgov ernmentgrant
5.byexchange

I
NITI
ALRECOGNI
TION

Anintangibl
eassetshal
lbeini
ti
all
ymeasuredatcost
.Itscost
sconsist
sofits
purchaseprice,andanydi
rect
lyat
tri
butabl
ecostofpr
epari
ngtheassetf
oritsi
ntended
use.

I
LLUSTRATI
ON:(
ENTRI
ESTORECORDTRANSACTI
ONSRELATI
NGTOPATENT)

OnJanuary3,2013,OrangecompanyspentP250,000toapplyforandobtai
napatent
onanewl ydeveloppr
oduct.Thepat enthasanest
imatedusefull
ifeof10years.Atthe
beginni
ng ofy ear2015,the company spentP50,000 i
n successful
l
y defendi
ng an
att
empt edi
nfr
ingementofthepatent
.

Atthebeginningof2018,t hecompanypurchasedf orP75,000apat entthatwas

expect
edtoprolongthel
if
eoft heor
igi
nalpat
entby5y ears.OnJuly1,2021,acompet
it
or
obtai
nedri
ght
st oapatentthatmadethecompany’
spat entobsol
ete.

Theentr
iesf
ory
ear2013t
o2021t
orecor
dtr
ansact
ionsr
elat
ingt
opat
entwer
eas
fol
lows:

Jan.
3,2013 Pat
ent
s 250,
000
Cash 250,
000
Tor
ecor
dcostofpat
ent
.

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s(250,
000/
10y
ear
s) 25,
000 25,
000
3
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s
Amor
ti
zat
ionofpat
entf
ort
hey
ear2013

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 25,
000
4
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 25,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2014sameof
2013

2015( ) LegalFees
beg. 50,
000
Cash 50,
000
Costi
ncur
redt
odef
endpat
ent

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 25,
000
5
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 25,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2015-sameof
2013.Thelegalf
eesi
ncurr
edatthebeg.of2015donot
aff
ecttheamountofannualamort
izat
ion.

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 25,
000
6
 Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 25,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2016

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 25,
000
7
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 25,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2017

2018( ) Pat
beg. ent
s 75,
000
Cash 75,
000
Costofpat
entpur
chased

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 20,
000
8
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 20,
000
Amor t
izat
ionofpat
entfort
heyear2018.(pl
srefer
tothecomputati
onofrevi
sedamorti
zati
onont he
nextpage.)

Dec. 201 Amor

31, ti
zat
ionExpense–Pat
ent
s 20,
000
9
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 20,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2019.

Dec. 202 Amor

31, ti
zat
ionExpense–Pat
ent
s 20,
000
0
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 20,
000
Amor
ti
zat
ionofpat
entf
ort
hey
ear2020.

Jul 2021 Amor

y1, ti
zat
ionExpense–Pat
ent
s(20,
000/
2) 10,
000
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 10,
000
Amor ti
zati
onofpat
entf
or6mos.JanuarytoJune
30,2021.Thepat
entwasdecl
aredobsol
eteonJul
y
1,2021.

Jul
y1, Lossf
rom Wr
it
e-of
fofPat
ent
s(pl
sref
ert
othecomp.bel
ow) 130,
000
2021
Accumul
atedAmor
ti
zat
ion-
Pat
ent
s 195,
000
Pat
ent
s(250,
000+75,
000) 325,
000
Towr
it
e-of
fpat
ent

Comput
ati
onofaccumul
atedamor
ti
zat
ionf
rom Jan.3,
2013t
oJul
y1,
2021.

CostofPatent(acquiredonJan.3,
2013) P250,
000
Di
videbyest.useful l
i
fe 10year
s
Annualamorti
zation P25,
000
Multi
plybyno.ofy earsfr
om 2013to2017 5year
s
Accumulatedamor ti
zati
on(asofDec.31.2017) P125,
000

Computat
ionofr
evi
sedannual
amor
ti
zat
ionofpat
ent(
star
ti
ngy
ear
2018)

Costofor igi
nalpatent P250,
000
Less: accumulatedamor t
izati
on(Dec.31.2017) 125,
000
Carryingvalueofpat ent( Dec.31.2017) P125,
000
Add: Costofacqui r
edpat entatthebeg.Of2018 75,
000
CarryingvalueofPat ent( beg.of2018) P200,
000
Divi
debyr emainingusef ul l
if
e(10y rs.
less5expir
edyrs.Pl
us5y
rs) 10yrs.
Revisedannual amor t
izationofpatentst ar
ti
ngyear2018 P20,
000
Multiplybyno.ofy rs.From y ear2018t oJuly1,2021 3.
5yrs.
Accumul atedamor tization( f
rom year2018t oJul
y1,2021) P70,
000

Accumul
atedamor
ti
zat
ion-Jan.3,
2013t
oDec.31.2017 P125,
000
 Add:Accumulatedamort
izati
on(f
rom y
ear2018toJuly1,2021) 70,
000
Totalaccumulatedamor
tizat
ionofPat
ent(Jul
y1,2018,dateofwr
it
e P195,
000
-
off)

COMPUTATI
ONOFLOSSFROM THEWRI
TE-
OFFOFPATENT

Costoforigi
nalPatentacqui redonJan.3.2013 P250,
000
Add:CostofPat entacquiredbeg.of2018 75,
000
TotalcostofPatents P325,
000
Less:Accumul atedAmor tizati
on(asofdateofwri
te-of
f) 195,
000
Carry
ingvalueofPat entasofdat eofwri
te-off(
ChargedtoLoss
fr
om thewr i
te-
offofPat ent P130,
000
MULTI
PLECHOI
CE-
PROBLEMS

1. I
nJanuar y,
2016,KitCor porati
onpurchasedapat entforanewconsumerpr oductforP840, 000.
Atthetimeofpur chase, t
hepat entwasv al
idforfi
fteeny ears.Duetothecompet it
ivenatureof
theproduct,however,thepat entwasest imatedtohav eausef ulli
feofonlytenyears.Dur ing
2021 thepr oductwasper manentlyremov ed fr
om t hemar ketundergov er
nment alor der
becauseofapot enti
alheal thhazardpresentinthepr oduct.Whatamountshoul dKi tcharget o
expenseduring2021, assumi ngamorti
zat i
onisrecordedatt heendofeachy ear
?
a.P560, 000.
b.P420, 000.
c. P 84,000.
d.P 56, 000.

2. On January2,2021,KatCo.boughta t r
ademarkfr
om Roy ce,Inc.f orP1,200,
000.An
i
ndependentresear
chcompanyesti
matedt hatther
emaini
ngusefull
ifeoft hetr
ademarkwas
10 year
s.Its unamor
ti
zed coston Royce’sbookswasP900, 000.I n Kat’
s2021 income
st
atement,whatamountshoul
dbereport
edasamor ti
zat
ionexpense?
a.P120,000.
b.P 90,000.
c. P 60,
000.
d.P 45,000.

3. BlueCompany ’s12/31/20statementoffinanci
alposit
ionreport
sassetsofP5,000,000and
l
iabil
it
iesofP2,000,
000.AllofBlue’
sassets’bookvaluesapproxi
matethei
rfai
rv al
ue,except
forland,whichhasaf airvaluethati
sP300, 000greatert
hani t
sbookv al
ue.On12/ 31/
20,
Whi t
eCorporati
onpaidP5,400,000toacquir
eBlueCo.Whatamountofgoodwi llshouldWhite
recordasaresultoft
hispurchase?
a.P - 0-
b.P400, 000
c. P2,100,
000
d.P2, 400,
000

4. MiniCorp.acqui
resapatentf
rom MaxiCo.inexchangef or2,
500shar esofMi niCor
p.’
sP5par
val
ueordinaryshar
esandP85, 000cash.Whent hepatentwasiniti
all
yissuedtoMax iCo.
,Mini
Corp.
’ssharesweresel
li
ngatP7. 50pershare.WhenMi niCorp.acquir
edt hepatent
,it
sshar
es
weresell
ingforP9ashare.MiniCorp.shoul
drecordthepatentatwhatamount ?
a.P 97, 500
b.P103, 750
c. P107,500
d.P 85, 000

5. AlonzoCo.acqui r
es3pat entsfr
om ShaqCor p.foratotalofP300,000.Thepat ent
swere
carri
edonShaq’ sbooksasf ol
l
ows:Pat entAA:P5,000;PatentBB:P2, 000;andPatentCC:
P3,000.WhenAl onzoacquir
edthepat ent
stheirf
airval
ueswer e:PatentAA:P20,000;Pat
ent
BB: P240,
000;andPatentCC:P60,000.AtwhatamountshouldAlonzor ecor
dPatentBB?
a.P100, 000
b.P240, 000
c. P2,000
d.P225, 000

6. Jef
fCor
por
ati
onpur
chasedal
i
mit
ed-
li
fei
ntangi
bleassetf
orP150,
000onMay1,
2019.I
thasa
 usef
ulli
feof10y ears.Whattot
alamountofamor
ti
zat
ionexpenseshoul
dhav
ebeenr
ecor
ded
ontheintangi
bleassetbyDecember31,2021?
a.P - 0-
b.P30, 000
c. P40,000
d.P45, 000

7. RichCorporat
ionpurchasedali
mit
ed-l
i
feintangi
bleassetf
orP270,000onMay1,2019.I
thasa
usefull
i
f eof10years.Whattot
alamountofamor ti
zati
onexpenseshoul
dhavebeenrecor
ded
ontheintangi
bleassetbyDecember31,2021?
a.P - 0-.
b.P54, 000
c. P72,000
d.P81, 000

8. ThompsonCompanyincurr
edresearchanddevelopmentcostsofP100,
000andlegalfeesof
P50,
000toacqui
reapatent
.Thepatenthasalegall
if
eof20y ear
sandauseful
li
feof10y ear
s.
Whatamountshoul
dThompsonr ecordasPat
entAmor t
izat
ionExpensei
nthef
ir
styear?
a.P0.
b.P 5,000.
c. P 7,
500.
d.P15,000.

9. ELOCor porati
onpurchasedapat entforP135,
000onSeptember1, 2019.I
thadausefull
if
eof
10y ears.OnJanuary1, 2021,ELOspentP33,000tosuccessf
ull
ydefendthepatenti
nalawsui
t.
ELOf eelst hatasoft hatdate,t
her emaini
ngusefull
ifeis5y ear
s.Whatamountshoul dbe
reportedforpatentamor t
izat
ionexpensefor2021?
a.P30, 900.
b.P30, 000.
c. P28, 200.
d.P23, 400.

10. DanksCor porat

ionpurchasedapat entf
orP540,000onSeptember1, 2019.Ithadausefull
if
e
of10y ears.OnJanuar y1,2021,DanksspentP132,000tosuccessful
l
ydef endthepat
entina
l
awsuit.Danksf eel
st hatasoft hatdate,t
heremai ni
ngusefull
ifeis5y ears.Whatamount
shoul
dber epor
tedforpatentamorti
zati
onexpensefor2021?
a.P134, 400.
b.P120, 000.
c. P123,600.
d.P 93, 600.

11. Thegenerall
edgerofVanceCor
por
ati
onasofDecember31,2021,i
ncl
udest
hef
oll
owi
ng
account
s:
Copyri
ghts P 30,
000
Deposit
swi t
hadvert
isi
ngagency(wil
lbeusedtopromot
egoodwi
l
l) 27,
000
Bondsinkingfund 70,
000
Excessofcostoverfai
rval
ueofident
ifi
abl
enetasset
sof
Acquir
edsubsidi
ary 390,
000
Trademarks 120,
000
Inthepreparat
ionofVance'
sstat
ementoff i
nanci
alposi
ti
onasofDecember31,2021,what
shoul
dber eportedast
otal
int
angi
bleasset
s?
a.P510, 000.
b.P537, 000.
c. P540,000.
d.P537, 000.

Uset
hef
oll
owi
ngi
nfor
mat
ionf
ort
henextt
woquest
ions.
OnJanuary1,2020,Bi ngham Inc.pur chasedapat entwit
hacostP2, 320,
000,ausefull
if
eof5
years.The company uses st rai
ght-l
ine depreci
ation.AtDecember31,2021,t he company
determi
nesthatimpairmentindicatorsarepresent.Thefairval
uelesscost
st osel
lthepatenti
s
esti
matedtobeP1, 080,000.Thepat ent'
sv al
ue-i
n-useisesti
matedtobeP1,130,
000.Theasset'
s
remaini
nguseful
lif
eisest i
matedt obe2y ear
s.
12. Bi
ngham's2021incomest
atementwi
l
lrepor
tLossonI
mpai
rmentof
a.P0.
b.P262,000.
c. P312,
000.
d.P1,190,
000.

13. Thecompany'
s2022i
ncomest
atementwi
l
lrepor
tamor
ti
zat
ionexpensef
ort
hepat
entof
a.P377,000.
b.P464,000.
c. P565,
000.
d.P1,190,
000.

14. Malrom ManufacturingCompanyacqui redapatentonamanufactur

ingprocessonJanuary1,
2020f orP4,
000,000.Itwasexpectedt ohavea10y earl
i
feandnoresidualval
ue.Mal
rom uses
str
aight-
li
neamor ti
zationforpatents.OnDecember31,2021,therecoverabl
eamountoft he
patentwasest i
mat edt obeP2,720,000.Atwhatamountshoul
dt hepatentbecarri
edont he
December31, 2021bal ancesheet?
a.P4, 000,
000
b.P3, 600,
000
c. P3,200,
000
d.P2, 720,
000

15. I
n2021,
Edwar
dsCor
por
ati
oni
ncur
redr
esear
chanddev
elopmentcost
sasf
oll
ows:
Mater
ial
sandequi
pment P105,
000
Per
sonnel 120,
000
I
ndi
rectcost
s 150,
000
P375,
000
Thesecostsrelat
etoaproductthatwil
lbemarket
edi n2022.I
tisesti
matedthatt
hesecosts
wil
lberecoupedbyDecember31,2023,butitsprocesshasnotachievedeconomicv i
abi
l
ity
.
Theequipmenthasnoalter
nati
vefutur
euse.Whatistheamountofresear
chanddev el
opment
cost
sthatshouldbeexpensedi
n2021?
a.P0.
b.P225, 000.
c. P270,000.
d.P375, 000.

16. Hal
lCo.i
ncur
redr
esear
chanddev
elopmentcost
sin2021asf
oll
ows:
Materialsusedi nresearchanddev elopmentpr oj
ect
s P 850,
000
Equipmentacqui r
edt hatwil
lhavealternatefutur
eusesi nf ut
ureresear ch
anddev el
opmentpr oj
ects 3,
000,
000
Depreciati
onf or2021onabov eequipment 300,
000
Personnel costsofper sonsinvol
vedi nresearchanddev elopmentpr ojects 750,000
Consultingfeespai dtooutsidersforresearchanddev elopmentpr ojects 300,
000
I
ndirectcost sreasonablyall
ocabletor esearchanddev elopmentpr ojects 225,
000
P5,
425,
000
Assumeeconomi cv i
abil
i
t yhasnotbeenachi eved.
Theamountofr esearchanddev el
opmentcost schargedt oHall'
s2021i ncomestatement
shoul
dbe
a.P1,900, 000.
b.P2,200, 000.
c. P2,
425, 000.
d.P4,900, 000.

17. LeeperCor
por
ati
oni
ncur
redt
hef
oll
owi
ngcost
sin2021:
Acquisit
ionofR&Dequi pmentwithausef ull
ifeof
4y earsi
nR&Dpr oject
s P900,
000
Costofmaki ngminormodi f
icati
onstoanexi sti
ngproduct 140,
000
Adverti
singexpensetointr
oduceanewpr oduct 700,
000
Engineeri
ngcostsincurr
edtoadv anceapr oducttoful
l
producti
onstage(economi cviabi
l
itynotachieved) 600,
000
Whatamountshoul
dLeeperr
ecor
dasr
esear
ch&dev
elopmentexpensei
n2021?
a.P 825,000
 b.P1,040,
000
c. P1,
375,
000
d.P1,740,
000

18. Dur
ing2021,
LeonCo.i
ncur
redt
hef
oll
owi
ngcost
s:
Testi
nginsearchforprocessal
ter
nati
ves P 380,
000
Costsofmarketi
ngr esear
chfornewproduct 250,
000
Modifi
cati
onofthef ormul
ati
onofaprocess 510,
000
Researchanddevelopmentservi
cesperf
ormedbyBeckCor
p.f
orLeon 425,
000
InLeon's2021incomest
atement
,resear
chanddev
elopmentexpenseshoul
dbe
a.P510, 000.
b.P935, 000.
c. P1,315,
000.
d.P1, 565,
000.

19. Ri
l
eyCo.i
ncur
redt
hef
oll
owi
ngcost
sdur
ing2021:
Signi
fi
cantmodi f
icat
iontotheformul ati
onofachemi calpr
oduct P160,
000
Trouble-
shooti
nginconnectionwi thbreakdownsduri
ngcommer cial
producti
on 150,
000
Costofexplorat
ionofnewf ormul as 200,
000
Seasonalorotherperiodi
cdesignchangest oexist
ingproduct
s 185,
000
Laborator
yresearchaimedatdi scoveryofnewtechnology 275,
000
Ini
tsincomest at
ementf ort
hey
earendedDecember31,2021,Ri
l
eyshoul
drepor
tresear
ch
anddevelopmentexpenseof
a.P635,000.
b.P785,000.
c. P820,
000.
d.P970,000.

20. OnJune30,2021,Cey ,Inc.exchanged2,000sharesofSeelyCorp.P25parv al

ueor di
nary
sharesforapat entownedbyGor eCo.TheSeelystockwasacqui r
edi n2021atacostof
P55,000.Attheexchangedate,Seel
yordinar
yshar
eshadaf ai
rval
ueofP48pershar e,andthe
patenthadanetcarryi
ngv al
ueofP110,000onGore'
sbooks.Ceyshouldrecor
dthepatentat
a.P50, 000.
b.P55, 000.
c. P96,000.
d.P110, 000.

21. OnMay5,2021,MacDougalCor p.exchanged2,000sharesofitsP25parv al

ueor dinar
y
treasur
ysharesf
orapatentownedbyMassetCo.Thet r
easuryshar
eswereacquiredin2020
forP45,000.AtMay5,2021,MacDougal
'sordi
nar
yshareswasquotedatP38pershar e,and
thepatenthadacarr
yingval
ueofP68,000onMasset'sbooks.MacDougalshouldrecordthe
patentat
a.P45, 000.
b.P50, 000.
c. P60,000.
d.P76, 000.