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  1. #1
    Registered User T2TL's Avatar
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    Intermediate Accounting 2 - Intangible Assets help. 9k reps

    My professor has the 12th edition, I have the 13th so whenever we go over problems I'm a bit lost. I think I got most of the chapter down but am confused with one question.

    Devon Harris company has provided information on intangible assets as follows.
    A patent was purchased from Bradtke Company for $2,500,000 on January 1, 2009. Harris estimated the remaining useful life of the patent to be 10 years. The patent was carried in Bradtke's accounting records at a net book value of $2,000,000 when Bradtke sold it to Harris.
    During 2010, a franchise was purchased from Greene Company for $580,000. In addition, 5% of revenue from the franchise must be paid to Greene. Revenue from the franchise for 2010 was $2,500,000. Harris estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.

    Harris incurred research and development costs in 2010 as follows.
    Materials and equipment - $142,000
    Personnel - $189,000
    Indirect costs - $102,000
    ------------------------------------
    Total - $433,000

    Harris estimates that these costs will be recouped by December 31, 2013. The materials and equipment purchased have no alternative uses. On January 1, 2010, because of recent events in the field, Harris estimates that the remaining life of the patent purchased on January 1, 2009, is only 5 years from January 1, 2010.

    Instructions
    A) Prepare a schedule showing the intangibles section of Harris's balance sheet at December 31, 2010. Show supporting computations in good form.

    B) Prepare a schedule showing the income statement effect for the year ended December 31, 2010, as a result of the facts above. Show supporting computations in good form.
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  2. #2
    Registered User Mauibuilt904's Avatar
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    thanks for the neg earlier ***got..not helping you


    Major: Accounting
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  3. #3
    Registered User T2TL's Avatar
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    Originally Posted by Mauibuilt904 View Post
    thanks for the neg earlier ***got..not helping you


    Major: Accounting
    I live by the green or red boxes under my name. I die by the green or red boxes under my name. Guess that's how the cookie crumbles brah. You were hatin brah, it's the only way
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  4. #4
    Registered User Mauibuilt904's Avatar
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    Originally Posted by T2TL View Post
    I live by the green or red boxes under my name. I die by the green or red boxes under my name. Guess that's how the cookie crumbles brah. You were hatin brah, it's the only way
    hey man see this


































    ^ its me not helping you with accounting


    good luck
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  5. #5
    Registered User ses1357's Avatar
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    lol is it bad i did this last semester and don't remember at all how to do it?
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  6. #6
    Registered User T2TL's Avatar
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    Originally Posted by ses1357 View Post
    lol is it bad i did this last semester and don't remember at all how to do it?
    lol nah same thing happened to me. I'm doing summer classes and I already am forgetting some stuff I learned 2 months ago.
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  7. #7
    Registered User LayGord's Avatar
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    Originally Posted by T2TL View Post
    My professor has the 12th edition, I have the 13th so whenever we go over problems I'm a bit lost. I think I got most of the chapter down but am confused with one question.

    Devon Harris company has provided information on intangible assets as follows.
    A patent was purchased from Bradtke Company for $2,500,000 on January 1, 2009. Harris estimated the remaining useful life of the patent to be 10 years. The patent was carried in Bradtke's accounting records at a net book value of $2,000,000 when Bradtke sold it to Harris.
    During 2010, a franchise was purchased from Greene Company for $580,000. In addition, 5% of revenue from the franchise must be paid to Greene. Revenue from the franchise for 2010 was $2,500,000. Harris estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.

    Harris incurred research and development costs in 2010 as follows.
    Materials and equipment - $142,000
    Personnel - $189,000
    Indirect costs - $102,000
    ------------------------------------
    Total - $433,000

    Harris estimates that these costs will be recouped by December 31, 2013. The materials and equipment purchased have no alternative uses. On January 1, 2010, because of recent events in the field, Harris estimates that the remaining life of the patent purchased on January 1, 2009, is only 5 years from January 1, 2010.

    Instructions
    A) Prepare a schedule showing the intangibles section of Harris's balance sheet at December 31, 2010. Show supporting computations in good form.

    B) Prepare a schedule showing the income statement effect for the year ended December 31, 2010, as a result of the facts above. Show supporting computations in good form.

    Sup buddy... i have the test bank for the 12th edition I believe. Hit me up.
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  8. #8
    Registered User T2TL's Avatar
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    bump for sleep time
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  9. #9
    Registered User T2TL's Avatar
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    no one?
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  10. #10
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    Originally Posted by Mauibuilt904 View Post
    hey man see this



    its me not helping you with accounting


    good luck
    lmao as if anybody from AllBARN knows about accounting anyway
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  11. #11
    Registered User T2TL's Avatar
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    Originally Posted by southernstunna1 View Post
    lmao as if anybody from AllBARN knows about accounting anyway
    He doesn't know anything about accounting. He's mad that I negged him the other day for a dumb thread lol. Comes in here trying to "get me back"
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  12. #12
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    Easy as **** cuzzzzzz
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  13. #13
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    Originally Posted by southernstunna1 View Post
    lmao as if anybody from AllBARN knows about accounting anyway
    i guess i should tell the guy at merril lynch that gave me an internship that
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  14. #14
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    Originally Posted by Mauibuilt904 View Post
    i guess i should tell the guy at merril lynch that gave me an internship that
    merril isn't even an accounting firm though big dog. And which office? Atlanta?
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  15. #15
    Registered User Mauibuilt904's Avatar
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    Originally Posted by southernstunna1 View Post
    merril isn't even an accounting firm though big dog. And which office? Atlanta?
    Jax...where i live, before i get crucified for going to school in bama lol
    but yeah im finance/accounting major going to junior yr.
    next summer im under a cpa for 6 weeks, then an financial planner for 6...
    don't know what to chose yet.
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  16. #16
    Registered User kalmamd's Avatar
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    Intangibles go the blance sheet at Cost. Amoritize over straightine over the remaining useful life (the expense hits the I/S). Researh and development is expensed in most cases however with patents i think it may be different (look in ur book to see if they are capitalized to the carrying amount of the intangible asset.

    Actaully, since the equipment used in R&D has no other uses it will be expensed the year purchased.

    The initial franchise fee is capitalized. I think it stays on the B/S at cost but not positive. Might amortize it.

    Thats the jist of it.

    Edit: I have a Masters in Acct and Bachelors for Auburn in acct
    boobs ftw
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  17. #17
    Registered User T2TL's Avatar
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    Originally Posted by kalmamd View Post
    Intangibles go the blance sheet at Cost. Amoritize over straightine over the remaining useful life (the expense hits the I/S). Researh and development is expensed in most cases however with patents i think it may be different (look in ur book to see if they are capitalized to the carrying amount of the intangible asset.

    Actaully, since the equipment used in R&D has no other uses it will be expensed the year purchased.

    The initial franchise fee is capitalized. I think it stays on the B/S at cost but not positive. Might amortize it.

    Thats the jist of it.

    Edit: I have a Masters in Acct and Bachelors for Auburn in acct
    Thanks repped. What about the recouped part? That's what's getting me
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  18. #18
    Mark is cool. msru's Avatar
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    Originally Posted by T2TL View Post
    Thanks repped. What about the recouped part? That's what's getting me
    The problem states the costs will be recouped by 2013, or 3 years from 2010. You may amortize them over the next three years. The problem states the costs occured during 2010. You may begin the amortization using the "half-year" convention and start the amortization in mid-2010.

    These are just guesses and general pointers though. I'm a CPA but I haven't really worked with these textbook problems since I studied for the exam. Good luck.
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    Originally Posted by T2TL View Post
    Thanks repped. What about the recouped part? That's what's getting me
    msru is correct. You are allowed to amortize some R&D costs. So like he stated, you would be able to amortize the amount over a 3 year period.
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    Originally Posted by axfac View Post
    I miss taking finance/accounting, brb goin back to get second degree.
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    Originally Posted by jcilla26 View Post
    msru is correct. You are allowed to amortize some R&D costs. So like he stated, you would be able to amortize the amount over a 3 year period.
    So I would change the amortization to 3 years instead of the 5 and 10 years? Or do I amortize the same each year until Dec. 31, 2013?
    I have the hw answers they are just confusing, trying to figure out where the recoup changes anything. Looks like it doesn't effect any of the problems, so did they just put this in to confuse the reader?
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    Originally Posted by T2TL View Post
    So I would change the amortization to 3 years instead of the 5 and 10 years? Or do I amortize the same each year until Dec. 31, 2013?
    I have the hw answers they are just confusing, trying to figure out where the recoup changes anything. Looks like it doesn't effect any of the problems, so did they just put this in to confuse the reader?
    The 10 year useful life is for a franchise that was purchased. The 3 years, from my understanding, is just the useful life of the R&D costs.
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    Originally Posted by jcilla26 View Post
    The 10 year useful life is for a franchise that was purchased. The 3 years, from my understanding, is just the useful life of the R&D costs.
    ooo so this doesn't have to do anything with the purchases themselves? Just the expenses from them (R&D)? Still seems like it doesn't effect the problem at all though in terms of the end of year 2010 BS and IS. If it doesn't effect them I think I understand the problem.
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    Originally Posted by T2TL View Post
    ooo so this doesn't have to do anything with the purchases themselves? Just the expenses from them (R&D)? Still seems like it doesn't effect the problem at all though in terms of the end of year 2010 BS and IS. If it doesn't effect them I think I understand the problem.
    I would think it would have an effect, especially on the income statement. Do you have the solution on your computer? If so, post it or send it to me.
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    Originally Posted by jcilla26 View Post
    I would think it would have an effect, especially on the income statement. Do you have the solution on your computer? If so, post it or send it to me.
    Patent from Bradkte Company
    Amortization of patent for 2010 (2,250,000 / 5)..........................................450,00 0

    Franchise from Greene Company
    Amortization of franchise for 2010............................58,000

    Payment to Greene Company (2,500,000 x 5%)..........125,000......................183,000

    Research and Development....................................... ..............................433,000

    Total charge against income............................................ ....................1,066,000
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    Originally Posted by T2TL View Post
    Patent from Bradkte Company
    Amortization of patent for 2010 (2,250,000 / 5)..........................................450,00 0

    Franchise from Greene Company
    Amortization of franchise for 2010............................58,000

    Payment to Greene Company (2,500,000 x 5%)..........125,000......................183,000

    Research and Development....................................... ..............................433,000

    Total charge against income............................................ ....................1,066,000
    Ok, well it looks like they amortized the franchise and patent, but not the R&D. Maybe those R&D costs fit under the category that couldn't be capitalized, so they expensed the full amount.
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    Originally Posted by jcilla26 View Post
    Ok, well it looks like they amortized the franchise and patent, but not the R&D. Maybe those R&D costs fit under the category that couldn't be capitalized, so they expensed the full amount.
    See that's what I'm confused about. Maybe I'm just looking too much into this problem and making it harder than it is. Looking at the answers it is just straight forward but the question seems a bit more complex. Will send some more reps around once I'm off recharge
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    Originally Posted by T2TL View Post
    See that's what I'm confused about. Maybe I'm just looking too much into this problem and making it harder than it is. Looking at the answers it is just straight forward but the question seems a bit more complex. Will send some more reps around once I'm off recharge
    Ok, the key to the amortization of R&D is "no alternative uses". I don't think you can amortize R&D if it doesn't have an alternative future use.
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