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Clinton Company has provided information on intang...




Clinton Company has provided information on intangible assets as follows. A patent was purchased from Reagan Company for $2,000,000 on January 1, 2007. Clinton estimated the remaining useful life of the patent to be 10 years. The patent was carried in Reagan?s accounting records at a net book value of $2,000,000 when Reagan sold it to Clinton. During 2008, a franchise was purchased from Bush Company for $480,000. In addition, 5% of revenue from the franchise must be paid to Bush. Revenue from the franchise for 2008 was $2,500,000. Clinton estimates the useful life of the franchise to be 10 years and takes a full year?s amortization in the year of purchase. Clinton incurred research and development costs in 2008 as follows. Materials and equipment ?.. $142,000 Personnel ???????? 189,000 Indirect costs ??????. 102,000 $433,000 Clinton estimates that these costs will be recouped by December 31, 2011. The materials and equipment purchased have no alternative uses. On January 1, 2008, because of recent events in the field, Clinton estimates that the remaining life of the patent purchased on January 1, 2007, is only 5 years from January 1, 2008. Instructions (a) Prepare a schedule showing the intangibles section of Clinton?s balance sheet at December 31, 2008. Show supporting computations in good form. (b) Prepare a schedule showing the income statement effect for the year ended December 31, 2008, as a result of the facts above. Show supporting computations in good form. Exercise 1 March 1, 2008, Heide Co. issued at 103 plus accrued interest $3,000,000, 9% bonds. The bonds are dated January 1, 2008, and pay interest semiannually on July 1 and January 1. In addition, Heide Co. incurred $27,000 of bond issuance costs. Compute the net amount of cash received by Heide Co. as a result of the issuance of these bonds. (b) On January 1, 2008, Reymont Co. issued 9% bonds with a face value of $500,000 for $469,280 to yield 10%. The bonds are dated January 1, 2008, and pay interest annually. What amount is reported as bond dis- count on the issue date? c) Czeslaw Building Co. has a number of long-term bonds outstanding at December 31, 2009. These long-term bonds have the following sinking fund requirements and maturities for the next 6 years. 2010 $300,000 $100,000 2011 100,000 250,000 2012 100,000 100,000 2013 200,000 ? 2014 200,000 150,000 2015 200,000 100,000 Indicate how this information should be reported in the financial statements at December 31, 2009. (d) In the long-term debt structure of Marie Curie Inc., the following three bonds were reported: mortgage bonds payable $10,000,000; collateral trust bonds $5,000,000; bonds maturing in installments, secured by plant equipment $4,000,000. Determine the total amount, if any, of debenture bonds outstanding. Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The balance sheet of Zweifel is given in an abbreviated form below. Moss and Zweifel agree that: 1. Land is undervalued by $30,000. 2. Equipment is overvalued by $5,000. Zweifel agrees to sell the gallery to Moss for $350,000. Instructions Prepare the entry to record the purchase of Zweifel Galleries on Moss?sbooks. Alex Rodriguez Inc., a publishing company, is preparing its December 31, 2008, financial statements and must determine the proper accounting treatment for the following situations; they have retained your group to assist them in this task. (a) Rodriguez sells subscriptions to several magazines for a 1-year, 2-year, or 3-year period. Cash receipts from subscribers are credited to magazine subscriptions collected in advance, and this account had a balance of $2,300,000 at December 31, 2008. Outstanding subscriptions at December 31, 2008, expire as follows. During 2009?$600,000 During 2010? 500,000 During 2011? 800,000 (b) On January 2, 2008, Rodriguez discontinued collision, fire, and theft coverage on its delivery vehicles and became self-insured for these risks. Actual losses of $50,000 during 2007 were charged to delivery expense. The 2006 premium for the discontinued coverage amounted to $80,000 and the controller wants to set up a reserve for self-insurance by a debit to delivery expense of $30,000 and a credit to the reserve for self-insurance of $30,000. (c) A suit for breach of contract seeking damages of $1,000,000 was filed by an author against Rodriguez on July 1, 2008. The company?s legal counsel believes that an unfavorable outcome is probable. A reasonable estimate of the court?s award to the plaintiff is in the range between $300,000 and $700,000. No amount within this range is a better estimate of potential damages than any other amount. (d) During December 2008, a competitor company filed suit against Rodriguez for industrial espionage claiming $1,500,000 in damages. In the opinion of management and company counsel, it is reasonably possible that damages will be awarded to the plaintiff. However, the amount of potential damages awarded to the plaintiff cannot be reasonably estimated. Instructions For each of the above situations, provide the journal entry that should be recorded as of December 31, 2008, or explain why an entry should not be recorded.


Paper#7922 | Written in 18-Jul-2015

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