Exercise 7-1

1. Intangible assets
2. Amortization
3. Expense
4. Copyright
5. Franchise
6. Expensed
7. Purchase cost, Fair values of net assets acquired
8. Amortized but tested for impairment at least once a year
9. Assets
10. Technological feasibility

Exercise 7-2
1. False
2. True
3. False
4. False
5. False
6. False
7. True
8. True
9. False
10. True
11. False
12. True
13. False
14. True
15. False
16. False
17. False
18. True
19. False
20. False

Exercise 7-3
1. D
2. C
3. B
4. D
5. D
Exercise 7-4
1.) a.
Purchase price 300,000
Consulting fees 40,000
Acquisition cost of patent 60,000
400,000

b.
Annual amortization
400,000 / 10 years 40,000

c.
Carrying amount of patent after 3 yrs
400,000 x 7/10 280,000

2.)
Purchase price 120,000
Legal Fees 15,000
Cost of copyright 135,000
/ Estimated useful life / 40
Annual amortization 3,375

3.)
a. Annual amortization
20M / 20 yrs 1,000,000

b. Carrying value of franchise after 5 years

20M / 15/20 15,000,000

c. Amortization 1,000,000
Annual payment 100,000
Decrease in income 1,100,000

4.) Fair value

a. Accounts receivable 400,000
Building 5,800,000
Machinery 500,000
Bonds Payable -200,000
Value of Danton, Inc. 6,500,000
b. Purchase price 7,000,000
Value of Danton Inc. -6,500,000
Goodwill 500,000

5.)
R&D expense 2,100,000

6.)
Capitalized cost of computer software 400,000

7.)
a. Cost of patent 50,000
Useful life 10
Annual amortization 5,000

b. Cost of patent 50,000

Accumulated amortization - 2020 -5,000
Carrying value, 12/31/2020 45,000

Cost of patent 50,000

Accumulated amortization - 2021 -10,000
Carrying value, 12/31/2021 40,000