Acct551 Week 1 Homework Solution

E 12-16

a. The full amount $325,000 should be charged to the income statements as R&D expense. An explanation of the R&D expenses should be provided in the notes to the financial statements.

b. Research and development expense 110,000

Cash/Accounts payable 110,000

Patents 16,000

Cash/Accounts payable 16,000

Patents Amortization expense 3,200*

Patents 3,200

*(16,000/5 = 3,200)

c. Patents 47,200

Cash/Accounts payable 47,200

The cost of defending the patent of 47,200 will be capitalized.

The amount of patent remaining (16,000 – 3,200) = 12,800

+New expense of defending the patent 47,200

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Total amount to be amortized 60,000

/ Year remaining 8 years

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Yearly amortization expense 7,500

Patents Amortization expense 7,500

Patents 7,500

d. The additional engineering and consulting cost incurred in 2015 to advance the design of a product to manufacturing state total $60,000 is a Research & Development cost. This R&D should be charged to income statement fully as R&D expense in 2015.

P 12-5

a. Goodwill = Purchase price – the fair value of the identifiable assets at the time of purchase

= 3,000,000 – 2,750,000 = $250,000

b. No impairment loss needs to be recorded. The carrying value of Conchita Division $1,650,000 is lower than fair market value $1,850,000.

c. Fair value of the Conchita Division...