ANSWER KEY QUIZ 1

True or False - False are 2, 3, 4, 7, 8 and 10.

Multiple Choice - A D C E C C B A C B.

Problem 1 -SIR CHING COMPANY

PATENT A PATENT B PATENT C
Cost 75,000 215,500 167,250
Useful life 20.0 12.5 16.0
Annual amortization 3,750 17,240 10,453
2010 depreciation 3,750 17,240 10,453
1 Total patent amortization for 2010 31,443

PATENT A PATENT B PATENT C

Cost 75,000 215,500 167,250
Annual amortization 3,750 17,240 10,453
2006 amortization 2,813 - -
2007 amortization 3,750 1,437 -
2008 amortization 3,750 17,240 -
2009 amortization 3,750 17,240 5,227
2010 amortization 3,750 17,240 10,453
Carrying value, 12/31/2010 57,188 162,343 151,570
2 Total carrying value, 12/31/2010 371,101

PATENT A PATENT B PATENT C

Cost 75,000 215,500 167,250
Useful life 20.0 12.5 16.0
Annual amortization 3,750 17,240 10,453
PATENT A PATENT B PATENT C
Cost 75,000 215,500 167,250

Annual amortization 3,750 17,240 10,453

2006 amortization 2,813 - -
2007 amortization 3,750 1,437 -
2008 amortization 3,750 17,240 -
2009 amortization 3,750 17,240 5,227
Carrying value, 01/01/2010 60,938 179,583 162,023
Revised useful life 15.00 10.00 12.00
Used up life 3.75 2.083 0.50
Remaining useful life 11.25 7.92 11.50
2010 amortization 5,417 22,684 14,089
3 Total patent amortization for 2010 42,190

Carrying value, 12/31/2010 55,521 156,899 147,934

4 Total carrying value, 12/31/2010 360,354
Problem 2 - HU Company (amount in millions)
5 The investment property is carried at fair value. 300

FV 300.000
Cost:
Downpayment 50.000
PV of installment 40 3.7908 151.632
Direct costs 0.250 201.882
6 Gain on change in FV 98.118

Problem 3 - BELLA Company

PV of installment 400,000 3.8897 1,555,880

2011 400,000 140,029.20 259,970.80 1,295,909
2012 400,000 116,631.83 283,368.17 1,012,541
7 2013 400,000 91,128.69 308,871.31 703,670
8 2014 400,000 63,330.27 336,669.73 367,000
2015 400,000 33,030.00 367,000.00 0

Problem 4 - NATIONAL Company

9 For 2010, the client should recognize the impairment

attributable to the building element; the land element is not
impaired. 12,000,000

10 The insurance claims has not been agreed as of 2010; hence, none
can be recognized. zero

11 The insurance claims is already receivable in 2011; hence, it can now

be recognized. 20,000,000

Land element 28,000,000

Replacement building 16,000,000
12 CV of investment property, 12/31/2011 44,000,000

Problem 5 - LILY Company

Franchise Patent Trademark

Initial fee 150,000 132,000 320,000
PV of annual payments 437,000
CV, before amortization 587,000 132,000 320,000
Useful life 10 8 20
Previous amortizations - - 40,000
CV, 01/01/2010 587,000 132,000 280,000
2010 Amortization 58,700 16,500 16,000
13 to 15 CV, 12/31/2010 528,300 115,500 264,000

16 Total amortization expense for 2010 91,200

Problem 6 - PEPE Company
Redeemable special gifts - 2010 18,750
Special gifts distributed 7,000
11,750
Unit cost 2.75
17 Estimated liability, 2010 32,312.50

Redeemable special gifts - 2010 18,750

Unit cost 2.75
18 Premium expense for 2010 51,562.50

Problem 7 - PILLAR Corporation

B = 5% x (2,800,000 - Tax) + Tax savings

Tax = 30% x (2,800,000 - B)
Tax savings = (30% x 2,800,000) - (30% x (2,800,000 - B)) = .30B

19 Simplifying, bonus will be 143,066

Net income before bonus and tax 2,800,000

Less:
Bonus 143,066
Tax 797,080 940,146
20 Net income after bonus and tax 1,859,854

PTS
1 BIYAYA Diversified Enterprises
Schedule of Analysis of Intangible Asset
31-Dec-10

Patent Franchise Org Costs Goodwill

Unadjusted balances, 12/31/2010 550,000 95,000 102,000 345,000
Adjustments:
2 1. Cost of improvement (52,500)
2 2. Royalty paid to franchisor (45,000)
2 3. Amortization of org costs (102,000)
2 4. Legal expenses (45,000)
2 5. Advertising expense (100,000)
Net adjustments (52,500) (45,000) (102,000) (145,000)
Adjusted balances before amortization 497,500 50,000 - 200,000
1 1 1 1