Exercise 12-8 Cullumber Company has provided information on intangible assets as
ID: 2588846 • Letter: E
Question
Exercise 12-8 Cullumber Company has provided information on intangible assets as follows A patent was purchased from Ford Company for $2,501,000 on January 1, 2016. Cullumber estimated the remaining useful life of the patent to be 10 years. The patent was carried in Ford's accounting records at a net book value of $1,968,000 when Ford sold it to Cullumber During 2017, a franchise was purchased from Polo Company for $505,000. In addition, 7% of revenue from the franchise must be paid to Polo. Revenue from the franchise for 2017 was $2,456,000. Cullumber estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase. Cullumber incurred research and development costs in 2017 as follows. Materials and equipment Personnel Indirect costs $139,600 193,600 102,800 436,000 Cullumber estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses. On January 1, 2017, because of recent events in the field, Cullumber estimates that the remaining life of the patent purchased on January 1, 2016, is only 5 years from January 1, 2017.Explanation / Answer
1)
Patent amortisation for 31 dec 2016 = cost/useful life
= 2501000/10 = 250100
Book value as on 1 jan 2017 = 2501000-250100 = 2250900
Patent amortisation for 2017 due to revised useful life :book value /useful life
= 2250900/5
= 450180
Total accumulated amortisation : 250100+450180= 700280
Carrying value of patent net of amortisation = 2501000-700280= 1800720
**Franchise amortisation :505000/10=50500
Franchise net of amortisation = 505000-50500= 454500
Intangible section of Balancesheet
For the year ended 31 december 2017
2)
Income statement
for the year ended 31 december 2017
Intangible section of Balancesheet
For the year ended 31 december 2017
Patent net of amortisation 1880720 Franchise net of amortisation 454500 Total intangibles 2,335,220Related Questions
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