PROBLEMS:

1. Queenie Company reported the following data at year-end:

Franchise P 1,500,000
Computer software 2,275,000.
Patent 1,750,000
Deferred charges 350,000
Bond sinking fund 1,200,000
Trademark 3,000,000

What total amount should be reported as intangible assets?

a. 8,525,000
b. 10,075,000
c. 8,875,000
d. 9,725,000
2. Yasmin Company paid P3,500,000 to purchase intangible assets with the following fair value:

Internet domain name P 1,000,000

Order backlog 750,000
In-process research and development 1,250,000
Operating permit 1,000,000

In addition, the entity spent P2,000,000 to run an advertising campaign to boost its image in the local community.

What amount should be recognized as cost of the order backlog?

a. 875,000
b. 656,275
c. 750,000
d. 656,250

3. Sweet Company incurred P1,600,000 of research and development costs to develop a product for which a patent was granted at
the beginning of current year.

Legal fees and other costs associated with registration of the patent totaled P300,000. At the year-end, the entity paid P450,000
for legal fees in a successful defense of the patent.

What is the total amount that should be capitalized for the patent at year-end?
a. 2,050,000
b. 2,350,000
c. 300,000
d. 750,000

4. Aynie Company acquired a patent for a drug with a remaining legal and useful life of six years on January 1, 2015 for
P5,400,000. On January 1, 2017, a new patent is received for an improved version of the same drug. The new patent has a legal
and useful life of twenty years.

What is the amortization expense for 2017?

a. 300,000
b. 180,000
c. 200,000
d. 900,000
 Use the following for the next two questions

Mikhail Company developed a new machine for manufacturing baseballs. Because the machine is very valuable, the entity had
it patented.

The following expenditures were incurred in developing and patenting the machine:

Purchase of special equipment to be used solely for development of the new machine P 2,000,000
Drawings required by patent office to be filed with patent application 30,000
Cost of testing prototype 300,000
Fees paid to government patent office 100,000
Research salaries and fringe benefits for engineers 350,000
Legal cost for filing patent 250,000

5. What amount of research and development cost should be expensed in the current year?
a. 2,650,000
b. 2,750,000
c. 3,030,000
d. 2,330,000
6. What amount should be capitalized as cost of patent?
a. 380,000
b. 630,000
c. 240,000
d. 400,000
7. Bob Co. purchased a patent for P7,140,000 on January 1, 2014. The patent is being amortized over the remaining legal life of
15 years expiring on January 2029.

During 2017, the entity determined that the economic benefits of the patent would not last longer than ten years from the date
of acquisition.

What is the carrying amount of patent on December 31, 2017?

a. 4,896,000
b. 5,236,000
c. 4,284,000
d. 5,050,000
8. Pengie Company incurred the following costs during the current year:

Routine on-going efforts to refine, enrich or otherwise improve an existing product P 125,000
Design, construction and testing of preproduction models 110,000
Quality control during commercial productions including routine testing of products 150,000
Laboratory research for discovery of new knowledge 180,000

What total amount should be reported as research and development expense?

a. 235,000
b. 275,000
c. 290,000
d. 330,000

9. Dolphie Company bought a franchise at the beginning of current year for P3,500,000. An independent consultant estimated that
the remaining useful life of the franchise was 70 years.

The unamortized cost of the franchise was P680,000. The entity decided to amortize the franchise over the maximum period
allowed.
 What amount should be recorded as amortization of franchise for the current year?
a. 50,000
b. 50,800
c. 40,286
d. 17,000

10. Panpan Company acquired a trademark relating to the introduction of a new manufacturing process. The entity incurred the
following costs:

Cost of trademark P 4,500,000

Employee benefits relating to testing of new process 300,000
Expenditure on promoting the new product 50,000

What total cost should be capitalized a intangible noncurrent asset in respect of the new process?
a. 4,750,000
b. 4,800,000
c. 4,250,000
d. 4,150,000

11. Adelie Company incurred the following costs during the current year:

Research and development services performed by Key Company for Adelie P 100,000
Design, construction, and testing of preproduction prototypes 200,000
Testing in search for new products or process alternatives 250,000

What total amount should be reported as research and development expense?

a. 550,000
b. 300,000
c. 450,000
d. 100,000

12. Badelie Company incurred the following costs during the current year:

Design of tools, jigs, molds, and dies involving new technology P 125,000
Modification of the formulation of a process 260,000
Trouble-shooting in connection with breakdowns during commercial
production 115,000

What total amount should be reported as research and development expense?

a. 500,000
b. 375,000
c. 285,000
d. 125,000

13. Dolphie Company made the following expenditures during the current year:

Costs to develop computer software for internal use in Dolphie's general

management information system P 750,000
Cost of market research activities 250,000

What is the research and development expense?

a. 750,000
b. 250,000
 c. 500,000
d. 1,000,000
Questions 14 - 16 are based on the following:
During the current year, Pengie Company incurred the following costs to develop and produce a computer software product:

Packaging product P 1,000,000

Completion of detailed program design 500,000
Costs incurred for coding and testing to establish technological feasibility 250,000
Costs of producing product masters for training materials 2,000,000
Duplication of computer software and training materials from product masters 140,000
Other coding costs after establishment of technological feasibility 200,000
Other testing costs after establishment of technological feasibility 300,000

14. What amount should be reported as inventory?

a. 1,000,000
b. 1,500,000
c. 3,000,000
d. 1,140,000
15. What total amount of the costs incurred should be expensed immediately?
a. 750,000
b. 500,000
c. 1,500,000
d. 1,750,000
16. What amount should be capitalized as software cost?
a. 3,000,000
b. 3,500,000
c. 2,500,000
d. 5,500,000

17. On January 1, 2017, Lasagna Company signed an eight-year lease for office space. The entity has the option to renew the lease
for an additional four-year period on or before January 1, 2024.

During January 2019, two years after occupying the leased premises, the entity made general improvements costing P7,200,000
and having a useful life of ten years.

On December 31, 2019, the entity's intention as to exercise of the renewal option is uncertain.

What is the depreciation of leasehold improvement for 2019?

a. 600,000
b. 1,200,000
c. 720,000
d. 1,440,000
Geller Company incurred the following costs in the current year:

Laboratory research aimed at discovery of new knowledge P 250,000

Advertising expense to introduce a new product 1,000,000
Quality control during commercial production 600,000
 18. What is the total amount of research and development expense?
a. 1,000,000
b. 1,850,000
c. 250,000
d. 600,000

19. Green Company incurred the following costs during the current year:

Start-up costs incurred when opening a new plant P 600,000

R and D equipment with useful life of four years in various R and D projects 500,000
Advertising expense to introduce a new product 1,000,000

What amount should be recorded as research and development expense?

a. 1,500,000
b. 500,000
c. 600,000
d. 2,100,000
20. Shawarma Company spent P3,000,000 on a new software package that is to be used only for internal use. The amount was
spent after the application development stage.

The economic life of the product is expected to be three years. The equipment on which the package is to be used is being
depreciated over six years.

What amount of expense should be reported for the first full year?
a. 3,000,000
b. 2,000,000
c. 1,000,000
d. 500,000
Questions 21 - 22 are based on the following:
Monkey Company has been working on creating a new tablet to compete with existing tablets. The entity is confident it has the
ability to sell the asset and show a profit.
The entity spent P2,000,000 during the first quarter of the year studying alternatives.
During the second quarter, the entity spent an additional P500,000 improving one alternative at which point it became
technologically and economically feasible.
During the third quarter, the entity spent another P1,000,000 on the tablet making it ready for use and sale by the end of the
year.
21. What amount should be capitalized?
a. 2,000,000
b. 1,000,000
c. 3,000,000
d. 2,500,000
22. What amount should expensed immediately?
a. 2,000,000
b. 1,000,000
c. 3,000,000
d. 2,500,000
23. On January 1, 2019, Baby Company signed an eight-year lease for office space. The entity has the option to renew the lease for
an additional four-year period on or before January 1, 2026.

During January 2019, the entity incurred the following costs:

 P1,200,000 for general improvements to the leased premises with an estimated useful life of ten years.
 P690,000 for office furniture and equipment with an estimated useful life of ten years.
 P420,000 for moveable assembly line equipment with useful life of five years.

On December 31, 2019, the entity's intention as to exercise of the renewal option is uncertain.

What is the accumulated depreciation of leasehold improvement on December 31, 2019?

a. 292,500
b. 175,000
c. 150,000
d. 125,000

24. At the beginning of the current year, Masbud Company purchased Fat Company at a cost that resulted in recognition of
goodwill of P1,000,000.

During the year, Masbud Company spent an additional P500,000 on expenditures designed to develop and maintain goodwill
by training and hiring new employees.

Due to these expenditures, Masbud Company estimated that the benefit period of goodwill was indefinite.

What amount should be reported as goodwill at year-end?

a. 1,000,000
b. 1,500,000
c. 500,000
d. 750,000
25. At year-end, Bing Company purchased for P20 per share all 200,000 of Geller Company's outstanding ordinary shares.

On this date, the carrying amount of net assets of the acquiree was P3,000,000.

The fair value of identifiable assets on this date was P100,000 in excess of their carrying amount.

What amount should be reported as goodwill?

a. 900,000
b. 1,000,000
c. 100,000
d. 4,000,000

26. At year-end, Tribbiani Company reported assets of P5,000,000 and liabilities of P2,000,000. The carrying amounts of the assets
approximate fair value, except for land which has a fair value that is P200,000 greater than carrying amount.

On the same date, Buffay Company paid P6,000,000 to acquire Tribbiani Company.

What amount of goodwill should be recorded by the acquirer as a result of this purchase?
a. 1,000,000
 b. 2,800,000
c. 2,700,000
d. 3,000,000
27. Taco Company purchased another entity for P8,000,000 at year-end. The carrying amount of the acquiree's net assets on the
date of purchase is P6,200,000.

An analysis indicated that the fair value of the acquiree's tangible assets exceeded the carrying amount by P800,000.

What amount of goodwill should be recognized by the acquirer?

a. 1,800,000
b. 1,200,000
c. 8,000,000
d. 1,000,000
28. Taisan Company made the following expenditures relating to product Y:

Legal costs to file a patent on Product Y. Production of the finished product

would not have been undertaken without the patent P 100,000
Cost of testing the prototype 225,000
Labor and material costs incurred in producing a prototype model 775,000
What is total amount of costs that should be expensed when incurred?
a. 325,000
b. 875,000
c. 775,000
d. 1,000,000
29. Chicharap Company incurred the following costs during the current year:

Seasonal design changes to existing products P 900,000

Modification to the formulation of a chemical product 200,000
Trouble-shooting in connection with breakdowns during commercial production 700,000

What amount should be reported as research and development expense?

a. 200,000
b. 700,000
c. 900,000
d. 1,800,000

30. Boobear Company incurred the following costs related to a new solar-powered car:

Salaries of laboratory employees researching how to build the new car P 700,000
Legal fees for the patent application for the new car 200,000
Marketing research to promote the new car 950,000
Design, testing, and construction of prototype 300,000
What amount should be reported as research and development expense for the current year?
a. 950,000
b. 1,150,000
c. 1,000,000
d. 300,000