Here are various transactions carried out by Zona Ltd. (Zona) during the fiscal year ended December 31, 20X6.

On February 1, 20X6, Zona signed an agreement that allows it to operate a 5-year franchise de Gnou inc. Zona must pay on 1, February 20X6 an initial amount of $ 100,000 and by the thereafter, it must make 4 annual payments of $ 60,000 each starting February 1, 20X7, for a total of $ 340,000. As of February 1, 20X6, the present value of the 4 annual installments is of $ 207,906, at a rate of 6%. According to the agreement, Gnou is to deliver equipment to Zona whose value is estimated at $ 40,000. According to Gnou, this equipment has a useful life of 6 years, but does not will not be usable in any circumstances other than the operation of the franchise. Gnou must also provide 2 years advertising service. The cost of this advertisement is estimated at $ 20,000 in total.

After these 5 years, Zona will have to pay Gnou a new amount to be able to continue the operation of the franchise. Zona does not plan to renew the franchise at the end of these 5 years.

Zona purchased a patent for cash at a cost of $ 54,520 on March 1, 20X6. This patent has a duration of legal life of 20 years from its legal registration on January 1, 20X16. Zona believes that this patent will generate benefits over the next 6 years from the date of its legal registration.

On June 1, 20X6, Zona purchased a right of use for an amount of $ 42,500 paid cash. In addition, during the acquisition, Zona had to pay $ 2,000 in legal fees related to this acquisition. The remaining legal life from this date is 30 years. The direction estimates that the item covered by this right of use will have no value in 25 years.

On July 1, 20X6, Zona obtained a broadcasting license for the sum of $ 150,000, paid in cash. This license expires in 10 years and is renewable indefinitely for periods of 10 years. At the date of acquisition, Zona does not expect broadcast technology used be replaced by another technology in the near future. The company wants renew this license for a long time. The renewal of the license automatic provided that Zona complies with regulatory requirements, which it has done throughout the exercise.

On September 30, 20X6, Zona acquired a client list for $ 90,000. She plans be able to derive benefits from the information contained therein for a period of time minimum of one year and a maximum duration of 3 years. According to the management of Zona, the best estimated useful life of the client list is 30 months.

a. For the above transactions, make all the necessary entries for the year ended December 31, 20X6.

b. As of December 31, 20X7, after making all of the adjustment entries, Zona realizes that the right of use has only a value of $ 10,000.

c. Regarding the right of use, make all the necessary paperwork for the year ended December 31, 20X7.

Answer rating: 100% (QA)

ANSWER b As of December 31 20X7 after making all of the adjustment entries Zona realizes that the ri... View the full answer