Homework 1
E 12-1:
(a) 10, 13, 15, 16, 17, 19, 23
(b) 1. Long-term investments in the balance sheet.
2. Property, plant, and equipment in the balance sheet.
3. Research and development expense in the income statement.
4. Current asset (prepaid rent) in the balance sheet.
5. Property, plant, and equipment in the balance sheet.
6. Research and development expense in the income statement.
7. Charge as expense in the income statement.
8. Operating losses in the income statement.
9. Charge as expense in the income statement. 11. Not recorded; any costs related to creating goodwill incurred internally must be expensed. 12. Research and development expense in the income statement. 14. Research and development expense in the income statement. 18. Research and development expense in the income statement. 20. Research and development expense in the income statement. 21. Long-term investments, or other assets, in the balance sheet. 22. Expensed in the income statement.
E 12-4:
1 . Alatorre should report the patent at $600,000 (net of $400,000 accumulated amortization) on the balance sheet. The computation of accumulated amortization is as follows.
Amortization for 2005 and 2006 ($1,000,000/10) X 2 $200,000
2007 amortization: ($1,000,000 – $200,000) ÷ (6 – 2) 200,000
Accumulated amortization, 12/31/07 $400,000
2. Alatorre should amortize the franchise over its estimated useful life.
Because it is uncertain that Alatorre will be able to retain the franchise at the end of 2015, it should be amortized over 10 years. The amount of amortization on the franchise for the year ended December 31, 2007, is
$40,000: ($400,000/10).
3. These costs should be expensed as incurred. Therefore $275,000 of organization expense is reported in income for 2007.
4. Because the license can be easily renewed (at nominal cost), it has an indefinite life. Thus, no amortization will be recorded. The license will be tested for impairment in future periods.
E
(a) 10, 13, 15, 16, 17, 19, 23
(b) 1. Long-term investments in the balance sheet.
2. Property, plant, and equipment in the balance sheet.
3. Research and development expense in the income statement.
4. Current asset (prepaid rent) in the balance sheet.
5. Property, plant, and equipment in the balance sheet.
6. Research and development expense in the income statement.
7. Charge as expense in the income statement.
8. Operating losses in the income statement.
9. Charge as expense in the income statement. 11. Not recorded; any costs related to creating goodwill incurred internally must be expensed. 12. Research and development expense in the income statement. 14. Research and development expense in the income statement. 18. Research and development expense in the income statement. 20. Research and development expense in the income statement. 21. Long-term investments, or other assets, in the balance sheet. 22. Expensed in the income statement.
E 12-4:
1 . Alatorre should report the patent at $600,000 (net of $400,000 accumulated amortization) on the balance sheet. The computation of accumulated amortization is as follows.
Amortization for 2005 and 2006 ($1,000,000/10) X 2 $200,000
2007 amortization: ($1,000,000 – $200,000) ÷ (6 – 2) 200,000
Accumulated amortization, 12/31/07 $400,000
2. Alatorre should amortize the franchise over its estimated useful life.
Because it is uncertain that Alatorre will be able to retain the franchise at the end of 2015, it should be amortized over 10 years. The amount of amortization on the franchise for the year ended December 31, 2007, is
$40,000: ($400,000/10).
3. These costs should be expensed as incurred. Therefore $275,000 of organization expense is reported in income for 2007.
4. Because the license can be easily renewed (at nominal cost), it has an indefinite life. Thus, no amortization will be recorded. The license will be tested for impairment in future periods.
E