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Question;P12-6 (Comprehensive Intangible Assets)Montana Matt's Golf Inc. was formed on July 1, 2009, when Matt Magilke purchased the Old Master Golf Company. Old Master provides video golf instruction at kiosks in shopping malls. Magilke plans to integrate the instruction business into his golf equipment and accessory stores. Magilke paid $770,000 cash for Old Master. At the time Old Master's balance sheet reported assets of $650,000 and liabilities of $200,000 (thus owners' equity was $450,000). The fair value of Old Master's assets is estimated to be $800,000. Included in the assets is the Old Master trade name with a fair value of $10,000 and a copyright on some instructional books with a fair value of $24,000. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 40 years. Instructions (a) Prepare the intangible assets section of Montana Matt's Golf Inc. at December 31, 2009. How much amortization expense is included in Montana Matt's income for the year ended December 31, 2009? Show all supporting computations. (b) Prepare the journal entry to record amortization expense for 2010. Prepare the intangible assets section of Montana Matt's Golf Inc. at December 31, 2010. (No impairments are required to be recorded in 2010.) (c) At the end of 2011, is evaluating the results of the instructional business. Due to fierce competition from online and television (e.g., the Golf Channel), the Old Master reporting unit has been losing money. Its book value is now $500,000. The fair value of the Old Master reporting unit is $420,000. The implied value of goodwill is $90,000. Magilke has collected the following information related to the company's intangible assets. Intangible Asset Exp.Cash Flows Fair Values Trade name $ 9,000 $ 3,000 Copyright $ 30,000 $ 25,000 Prepare the journal entries required, if any, to record impairments on Montana Matt's intangible assets. (Assume that any amortization for 2011 has been recorded.) Show supporting computations.QUESTION # 3 BE12-12 Nieland Industries had one patent recorded on its books as of January 1, 2010. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2010, Nieland incurred research and development costs of $96,000 and brought a patent infringement suit against a competitor. On December 1, 2010, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $85,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2010, balance sheet, assuming monthly amortization of patents? $?QUESTION # 4 (Accounting for Patents) During 2007, Thompson Corporation spent $170,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2007, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $24,000 related to the patent were incurred as of October 1, 2007. (a)Prepare all journal entries required in 2007 and 2008 as a result of the transactions above. Date Account/Description 2007 Research & Development Expense Debit? Cash Credit? (To record research and development costs) Account /Description Patents Debit? Cash Credit? ^(To record the patent) Account/Description Patent Amortization Expense Debit? Patents Credit? ^(To record amortization) 2008 Account/Description Patent amortization Expense Debit? Patents Credit? (b) On June 1, 2009, Thompson spent $12,400 to successfully prosecute a patent infringement. As a result, the estimate of useful life was extended to 12 years from June 1, 2009. Prepare all journal entries required in 2009 and 2010. (Round amounts to 0 decimal places, e.g. 2,510.) Date Account/Description 2009 Patents Debit? Cash Credit? (To record prosecution of patent infringement) Account/Description Patent Amortization Expense Debit? Patents Credit? (To record amortization) 2010 Patent Amortization Expense Debit? Patents Credit? (c) In 2011, Thompson determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December 31, 2012. Prepare all journal entries required in 2011 and 2012. (Round amounts to 0 decimal places, e.g. 2,510.) Date Account/Description 2011 and 2012 Patent Amorization Expense Debit? Patents Credits?E12-10)

 

Paper#45362 | Written in 18-Jul-2015

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