Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 1JC
1.
To determine
Whether the company should accrue, disclose or not report at all the contingency in the financial statement dated on 31st December, 2018.
Given information:
The company has gone through a case in which P sued for patent infringement. As on December 31st, 2018, the case was in the early stage and the company believed that they are likely to win. By the end of year 2019, the case progressed and
2.
To determine
The way in which the contingency should be reported as on December 31st, 2019.
3.
To determine
The way in which the contingency should be reported as on December 31st, 2020.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
A patent
is protected in other countries
by making separate applications
in those countries.
A.
a patent is protected for 20
years from the day on which the
patent application is filed.
В.
is limited to art, process,
machine, manufacture or
С.
composition of matter.
right is infringed when anyone
produces, uses, or sells a patent
D.
invention without the
permission of the patent owner.
Е.
All of the above
Safehouse Company was granted a patent on a product on
January 1, 2010 with a 20-year useful life.
To protect the patent, the entity purchased on January 1,
2020 for P4,500,000 a patent on a competing product which
was originally issued on January 1, 2015.
Because of the unique plant, the entity does not feel the
competing patent can be used in producing a product.
What is the amortization of the competing patent for 2020?
Kingbird had one patent recorded on its books as of January 1, 2017. This patent had a book value of $129,600 and a remaining useful
life of 6 years. During 2017, Kingbird incurred research and development costs of $203,500 related to this patent and was sued by a
competitor to nullify the patent. On September 1, 2017, the Court found that Kingbird's patent was valid and that its competitor could
not use the process Kingbird had patented. The company incurred $65,280 to defend this patent. At what amount should patent(s) be
reported on the December 31, 2017, balance sheet, assuming monthly amortization of patents?
Carrying amount 12/31/17
$
Chapter 13 Solutions
Intermediate Accounting (2nd Edition)
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - Prob. 13.3QCh. 13 - Do sellers recognize sales taxes as expenses on...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - What is a gam contingency? Is It accrued and...Ch. 13 - Do firms always accrue and record loss...Ch. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.1MCCh. 13 - Prob. 13.2MCCh. 13 - Prob. 13.3MCCh. 13 - Medical Services Inc allows employees at the end...Ch. 13 - Trade Notes Payables. On February 1, Seville...Ch. 13 - Unearned Revenues. On June 1 of the current year,...Ch. 13 - Unearned Revenues. GoSnow Inc. provides snow...Ch. 13 - Prob. 13.4BECh. 13 - Prob. 13.5BECh. 13 - Prob. 13.6BECh. 13 - Sales Taxes Payable. Kloth Fabric Store operates...Ch. 13 - Prob. 13.8BECh. 13 - Prob. 13.9BECh. 13 - Prob. 13.10BECh. 13 - Asset Retirement Obligation at Acquisition. On...Ch. 13 - Prob. 13.12BECh. 13 - Asset Retirement Obligation, Disposal. Buckner...Ch. 13 - Prob. 13.14BECh. 13 - Prob. 13.15BECh. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Warranty Liability, Assurance-Type Warranty,...Ch. 13 - Prob. 13.19BECh. 13 - Prob. 13.20BECh. 13 - Trade Notes Payable. On November 1, Barcelona...Ch. 13 - Unearned Revenues. On May 1 of the current year,...Ch. 13 - Gift Cards. Diamond Depot sold 57,000 of gift...Ch. 13 - Sales Taxes Payable. Eaton Technology operates...Ch. 13 - Prob. 13.5ECh. 13 - Asset Retirement Obligation. On January 1,...Ch. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Accounting for Premiums. Supergreen Grocers, Inc....Ch. 13 - Prob. 13.13ECh. 13 - Payroll Taxes Payable, Pay Exceeds. Wage Base....Ch. 13 - Current Operating Liabilities. James Stores, Inc....Ch. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Payroll Taxes Payable. Jackson Corporation employs...Ch. 13 - Prob. 1JCCh. 13 - Prob. 2JCCh. 13 - Prob. 3JCCh. 13 - Financial Statement Analysis Case You are...Ch. 13 - Surfing the Standards Case 1: Environmental...Ch. 13 - Prob. 2SSCCh. 13 - Prob. 1BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On January 1, 2008, Elyssa Company purchased a patent for a new consumer for a new consumer product for P900,000. At the time of purchase, the patent was valid for 15 years. However, the useful life was estimated to be only 10 years due to the competitive nature of the product. On December 31, 2011, the product was permanently withdrawn from sale under government order because of a potential health hazard in the product. Question: What amount should Elyssa charge against income during 2011, assuming amortization is recorded at the end of the year?arrow_forwardOn January 15, 2018, a corporation was granted a patent on a product. On January 2, 2020, to protect its patent, the corporation purchased a patent on a competing product that originally was issued on January 10, 2016. Because of its unique plant, the corporation does not feel the competing patent can be used in producing a product. The cost of the competing patent should be Amortized over a maximum period of 17 years Amortized over a maximum period of 13 years Amortized over a maximum period of 9 years Expensed in 2020arrow_forwardQUESTION 3 On June 30, 2020, Duts discovered that it had been manufacturing a product illegally since this product happened to be a patented product for which it did not have the necessary rights., Duts immediately shut down its factory and hired a firm of lawyers to act on its behalf in the acquisition of the necessary rights to manufacture this patented product. Legal fees of PhP 50 000 were incurred during July 2020. The legal process was finalized on July 31, 2020, when Bee was then required to pay PhP 800 000 to purchase the rights, including PhP 80 000 in refundable VAT. During the July factory shut-down: averhead costs of PhP 40 000 were incurred; and significant market share was lost with the result that Bee's total sales over August and September was PhP 20 000 but its expenses were PhP 50 000, resulting in a loss of PhP 30 000. To increase market share, Bee spent an extra PhP 25 000 aggressively marketing their product. This marketing campaign was successful, resulting in…arrow_forward
- On January 1, 2017, Jayjay Company, a large company, purchased a patent for a new consumer product for P4,800,000. At the time of purchase, the patent was valid for 10 years. However, the patent's useful life was estimated to be only 8 years due to a competitive nature of the product. On December 31, 2020, the product was permanently withdrawn from sale under government order because of a potential health hazard in the product. What amount should Jayjay Company charge against income during 2020, assuming amortization is recorded at the end of the such year? a. P600,000 b. P3,000,000 c. P3,360,000 d. P3,600,000arrow_forward5. Paris paid Cherry $333,333 on 12/31/2020 for the exclusive right to market a particular product using the Cherry Co name and logo in promotional material. The franchise follows the rules of Going Concern. Paris also spent $600,000 on 12/31/2020 in developing a new manufacturing process. Its application for a patent is submitted. Paris believes it will be successful In January of 2021 Paris application for a patent was granted. Legal and registrations costs incurred were $ 210,000. The patent runs for 20 years. But the manufacturing process will only be useful to Paris for 10 years Paris incurred $160,000 on 12/31/2020 in successfully defending one of its patents in an infringement suit. The patent expires during December 2024 On 12/31/2021 Paris also incurred $480,000 in an unsuccessful patent defense. As a result of the adverse verdict the patent with a remaining unamortized cost of $252,000 is deemed worthless What is the impact on net income after all proper adjustments are…arrow_forwardDuring 2020, Smith Company filed suit against West Problem 4-31 (AICPA Adapted) During 2020, Smith Company filed suit against West Company seeking damages for patent infringement. On December 31, 2020, the legal counsel believed that it was probable that Smith Company would be successful against West Company for an estimated amount of P1,500,000. On March 31, 2021, Smith Company was awarded P1,000,000 and received full payment thereof. The financial statements were issued March 1, 2021. In Smith Company's 2020 financial statements, how should this award be reported? a. As a receivable and revenue of P1,000,000. b. As a receivable and deferred revenue of P1,000,000. c. As a disclosure of a contingent asset of P1,000,000. d. As a disclosure of a contingent asset of P1,500,000.arrow_forward
- 3. Paris paid Cherry $333,333 on 12/31/2020 for the exclusive right to market a particular product using the Cherry Co name and logo in promotional material. The franchise follows the rules of Going Concern. Paris also spent $600,000 on 12/31/2020 in developing a new manufacturing process. Its application for a patent is submitted. Paris believes it will be successful In January of 2021 Paris application for a patent was granted. Legal and registrations costs incurred were $ 210,000. The patent runs for 20 years. But the manufacturing process will only be useful to Paris for 10 years What is the impact on net income related to the $210,000 of costs for the patent?arrow_forwardSplish Brothers Industries had one patent recorded on its books as of January 1, 2020. This patent had a book value of $480,000 and a remaining useful life of 8 years. During 2020, Splish Brothers incurred research and development costs of $92,000 and brought a patent infringement suit against a competitor. On December 1, 2020, Splish Brothers received the good news that its patent was valid and that its competitor could not use the process Splish Brothers had patented. The company incurred $127,500 to defend this patent. At what amount should patent(s) be reported on the December 31, 2020, balance sheet, assuming monthly amortization of patents? The amount to be reported $arrow_forwardFreetown Manufacturing company acquired three patents in January 2016. The patents have different lives as indicated in the following schedule. Cost Useful Life Legal Life Patent A 125,000 10 17 Patent B272,500 57 Patent C656,200Indefinite17 Patent C is believed to be uniquely useful as long as the company retains the right to use it. In June 2017, the company unsuccessfully attempted to defend its right to Patent B. Legal fees of P127,000 were incurred in this action. The company's policy is to amortize intangible assets by the straight-line method to the nearest half year. The company reports on a calendar-year basis. Required: How much is amortization expense recorded on 12/31/17?___________ How much is the amount of write-down of patent B?_____________ Carrying value of patent A?___________ Carrying value of patent C?___________5. rules in answering the problem_____arrow_forward
- Sandhill Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2019, the company expends $324,500 on a research project, but by the end of 2019 it is impossible to determine whether any benefit will be derived from it. (b) Your answer is correct. The project is completed in 2020, and a successful patent is obtained. The R&D costs to complete the project are $114,500. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2020 total $17,250. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Research and Development Expense 114500 Cash 114500 (To record research and…arrow_forward1. Paris paid Cherry $333,333 on 12/31/2020 for the exclusive right to market a particular product using the Cherry Co name and logo in promotional material. The franchise follows the rules of Going Concern What is the net impact on net income of any entry(ies) necessary related to the franchise at 12/31/2021?arrow_forwardCorporation was granted a patent on a product on January 1, 2004. To protect its patent. the corporation purchased on January 1, 2015 a patent on a competing product which was originally issued on January 10, 2011. The cost of the competing patent should be: a. amortized over a maximum period of 20 years. b. amortized over a maximum period of 16 years. c. amortized over a maximum period of 9 years. d. expensed in 2015 Explain each choices. Why is it not the answer or why it is the answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning