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M9 Practice Problem

The document provides information about transactions incurred by CUPIT 19 Corporation in 2021 related to intangible assets. 1. CUPIT 19 incurred costs of P492,500 to patent a newly developed process, with legal fees of P429,000 and licensing/application fees of P63,500. 2. CUPIT 19 acquired licenses and a trademark in exchange for 6,000 shares of stock worth P300,000 total, with the license worth twice as much as the trademark. 3. Other costs included goodwill promotion, a prototype shed, and research salaries. The document asks questions to determine costs of specific intangible assets and amounts that should be expensed.

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Reginald Valencia
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246 views2 pages

M9 Practice Problem

The document provides information about transactions incurred by CUPIT 19 Corporation in 2021 related to intangible assets. 1. CUPIT 19 incurred costs of P492,500 to patent a newly developed process, with legal fees of P429,000 and licensing/application fees of P63,500. 2. CUPIT 19 acquired licenses and a trademark in exchange for 6,000 shares of stock worth P300,000 total, with the license worth twice as much as the trademark. 3. Other costs included goodwill promotion, a prototype shed, and research salaries. The document asks questions to determine costs of specific intangible assets and amounts that should be expensed.

Uploaded by

Reginald Valencia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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M9 AUDITING INTANGIBLE ASSETS

PRACTICE PROBLEM

Transactions during 2021 of the newly organized CUPIT 19 Corporation


included the following:
Jan. 2 Paid legal fees of P150,000 and stock certificate costs of
P83,000 to complete organization of the corporation.
15 Hired a clown to stand in front of the corporate office for 2 weeks
and hound out pamphlets and candy to create goodwill for the
new enterprise. Clown cost, P10,000; pamphlets and candy,
P5,000.
Apr. 1 Patented a newly developed process with costs as follows:
Legal fees to obtain patent P 429,000
Patent application and licensing fees 63,500
Total P 492,500
It is estimated that in 6 years other companies will have
developed improved processes, making the CUPIT 19
Corporation process obsolete.
May 1 Acquired both a license to use a special type of container and a
distinctive trademark to be printed on the container in exchange
for 6,000 shares of CUPIT 19’s no-par common stock selling for
P50 per share. The license is worth twice as much as the
trademark, both of which may be used for 6 years.

July 1 Constructed a shed for P1,310,000 to house prototypes of


experimental models to be developed in future research
projects.
Dec. 31 Incurred salaries for an engineer and chemist involved in product
development totaling P1,750,000 in 2021.
QUESTIONS:
Based on the above and the result of your audit, determine the following:
1. Cost of patent
a. P492,500 b. P429,000 c. P63,500 d. P0
2. Cost of licenses
a. P150,000 b. P200,000 c. P100,000 d. P0
3. Cost of trademark
a. P150,000 b. P200,000 c. P100,000 d. P0
4. Carrying amount of Intangible Assets
a. P712,604 b. P2,477,604 c. P697,604 d. P0
5. Total amount resulting from the foregoing transactions that should be
expensed when incurred
a. P4,100,500 b. P1,983,000 c. P1,998,000 d. P0

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