PROBLEM 1

Transactions during 2019 of the newly organized ABC company included the following:

Jan 2 Paid legal fees of P233,000 to complete organization of the corporation

15 Hired a clown to stand in front of the corporate office for 2 weeks and hand out
pamphlets and candy to create goodwill for the new enterprise. Clown cost,
P10,000; pamphlets and candy, P5000
April 1 Patented a newly developed process with cost as follows:
Legal fees to obtain patent P429,000
Patent application and licensing fees 63,500
Total P492,500
It is estimated that in 6 years other companies will have developed improved
processess, making the ABC Company process obsolete
May 1 Acquired both a license to use a special type of container and a distinctive trademark
to be printed on the container in exchange for 6,000 shares of ABC Co. no-par ordinary
shares selling for P50 per share. The license is worth twice as much as the trademark
both of which may be used for 6 years.
July 1 Constructed a shed for P1,310,000 to house prototypes of experimental models
to be developed in future research projects
Dec 31 Incurred salaries for an engineer and chemist involved in product
development totalling P1,750,000 in 2019
Questions:
Based on the above and the result of your audit, determine the following:

1. Cost of parent
2. Cost of licenses
3. Cost of trademark
4. Carrying amount of Intangible assets
5. Total amount resulting from the foregoing transactions that should be expensed when incurred

PROBLEM 2
The DEF Co acquired several small companies at the end of 2018 and, based on the acquisitions,
reported the following intangibles in its December 31, 2018, statement of financial position:

Patent 200,000
Copyright 400,000
Tradename 350,000
Computer software 100,000
Goodwill 900,000

The company's accountant determines the patent has an expected life of 10 years and no expected
value and that it will generate approximately equal benefits each year. The company expects to use the
copyright and tradename for the foreseeable future. The accountant knows that the computer software
is used in the company's 120 sales offices. The company has replaced the software in 60 offices in 2019,
and expects to replace the software in 40 more offices in 2020 and the remainder in 2021

On December 31, 2019, there are no indicators of impairment of patent and computer software. The following
information relates to the other intangible assets.
a. Because of the rampant piracy, the copyright is expected to generate cash flows of just P8,000 per year
b. The tradename is expected to generate cash flows of P15,000 per year
c. The goodwill is associated with DEF Co manufacturing reporting unit. The cash flows expected to be generated
by the said reporting unit is P200,000 per year for the next 25 years. The reporting unit has a carrying amount of
P3,000,000

Based on the above and the result of your audit, determine the following: (Assume that the appropriate discount
rate for all items is 5%)
1. Total amortization of intangible assets in 2019?
2. Total loss on impairment in 2019?
3. Carrying amount of goodwill on December 31, 2019?
4. Carrying amount of other intangible assets on December 31, 2019?

PROBLEM 3

GHI Co has its own research department. However, the company purchases patents from time to time.
The following is a summary of transactions involving patents now owned by the company.

During 2013 and 2014, GHI Co spent a total of P459,000 in developing a new process that was patented (Patent A) on April 1, 2015;
additional legal and other costs of P50,000 were incurred.

A patent (Patent B) developed by Noynoy inventor, and inventor was purchased for P187,500 on December 1, 2016, on which
date is has an estimated useful life of 12.5 years

During 2015, 2016, 2017, research and development cost activities cost P510,000. No additional activities patents resulted from these activities

A patent infringement suit brought by the company against a competitor because of the manufacture of articles infinging on Patent B
was successfully prosecuted at a cost of P42,600. A decision in the case was rendered in June 2017.

On July 1, 2018, Patent C was purchased for P172,800. This patent had 16 years yet to run.

During 2019, GHI expended P180,000 on patent development. However, the company is still undecided as to how the patent, if approved
by the Bureau of Patents, will generate probable future economic benefits.

Assume that the legal life of each patent is also its useful life

1. What is Patent A's carrying value on December 31, 2019?

2. What is Patent B's carrying value on December 31, 2019?
3. What is Patent C's carrying value on December 31, 2019?
4. What is the total patent amortization expense to be reported in income statement for the year ended December 31, 2019?