1. During 2021, the following were acquired/paid for by Smallville Company Paid 800,000 in acquiring Clark Company....
Question:
1. During 2021, the following were acquired/paid for by Smallville Company
- Paid 800,000 in acquiring Clark Company. The amount included P60,000 for a technology patent; P45.000 for a franchise agreement and P80,000 which was attributed to the company's good reputation. Smallville Company likewise paid Clark Company P120,000 for a non-competing contract preventing Clark Company from engaging in a similar industry for a period of five years.
- Training cost incurred for a specialized product line, P60,000
The amount included under intangible assets is
2. During 2021, Lana Company acquired the following:
- Music copyrights. 60,000
- Cable television license, P95,000
- Acquired an operating system for a computer controlled machine for P90,000
- Acquired an application software for its design and rendering team, P110,000
The amount to be included as intangible assets is
3. During 2021, Chloe Company had the following transactions in relation to assets classified under intangible assets:
- A copyright was purchased from Chloe Company for P500,000 on January 1, 2021. It was estimated that the remaining useful life of the copyright was 10 years. The copyright was carried in the books of Sam Company at a net book value of P300,000 when Sam Company sold it to Chloe Company
Chloe Company signed an agreement on January 1, 2021, to operate as a franchise of Apples and Oranges Company for an initial franchise fee of P1,000,000. Of this amount P200,000 was paid when the agreement was signed and the balance is payable in 4 annual payments of P200,000 each, beginning January 1, 2022 The down payment is not refundable and no future services are required of the franchisor. Implicit rate for a note of this type was 14%.
| 3 periods | 4 periods | 5 periods | |
| PVF of P1 @ 14% | 0.675 | 0.592 | 0.519 |
| PVF of an OA @ 14% | 2.322 | 2.914 | 3.433 |
The amount capitalized as intangible assets by Chloe Company is
Expert Answer:
SOLUTION 1 The amount included under intangible assets for Smallville Company is Technology Patent P... View the full answer
