ch12 12/29

1. 2017/1/3() 17:30
(C)
2. X5 $1,000,000
X8 50
(10%) X8
(A)
X5
MaBelle Corporation incurred the following costs in 2015:
850,000
Acquisition of R&D equipment with a useful life of
4 years in R&D projects $500,000
Start-up costs incurred when opening a new plant 140,000 (D)
Advertising expense to introduce a new product 700,000 105/7/1 $300,000 105
Engineering costs incurred to advance a product to full
production stage (economic viability not achieved) 400,000
What amount should MaBelle record as research & development expense in 2015? (E)
(B)
Leeper Corporation incurred the following costs in 2015: a
Acquisition of R&D equipment with a useful life of b 20
4 years in R&D projects $900,000 c
Cost of making minor modifications to an existing product 140,000 d
Advertising expense to introduce a new product 700,000
Engineering costs incurred to advance a product to full
production stage (economic viability not achieved) 600,000 ()

What amount should Leeper record as research & development expense in 2015?
a
b
c
35%
d
(A)
Repeat 105/7/1 $120,000
18 Repeat
()

a
105 Repeat
b
c
(B)
d
105/1/1 $600,000
4 107 play
$150,000 play
$450,000

1
 (20%) (15%)
Presented below is information related to copyrights owned by Botticelli Company at December 31, 2015. Choo Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types
of air pollution. Choo does not manufacture or sell the products and processes it develops. Instead, it
conducts research and develops products and processes which it patents, and then assigns the patents to
manufacturers on a royalty basis. Occasionally, it sells a patent. The history of Choo's patent number 758-
6002-1A is as follows.
Assume that Botticelli Company will continue to use this copyright in the future. As of December 31,
2015, the copyright is estimated to have a remaining useful life of 10 years.
Instructions
(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2015. The
company does not use accumulated amortization accounts.
(b) Prepare the journal entry to record amortization expense for 2016 related to the copyrights.
(c) The fair value of the copyright at December 31, 2016, is $3,500,000. Prepare the journal entry (if any)
necessary to record the increase in fair value.
(d) The fair value of the copyright at December 31, 2017, is $3,800,000. Prepare the journal entry (if any)
necessary to record the increase in fair value.

(20%) Based on execution of a royalty contract in March 2012, the patent is deemed to be economically viable.
On July 31, 2015, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita
Choo assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2014,
Incorporated, which became a division (cash-generating unit) of Mexico. Conchita reported the following
it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year
statement of financial position at the time of the acquisition.
if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30.
The company's year ends December 31.
Instructions
Compute the carrying value of patent No. 758-6002-1A on each of the following dates:
(a) December 31, 2009.
(b) December 31, 2013.
It was determined at the date of the purchase that the fair value of the identifiable net assets of (c) December 31, 2016.
Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division
experienced operating losses. In addition, it now appears that it will generate substantial losses for the
foreseeable future. At December 31, 2015, Conchita reports the following statement of financial position
information.

It is determined that the recoverable amount of the Conchita Division is $1,850,000.

Instructions
(a) Compute the amount of goodwill recognized, if any, on July 31, 2015.
(b) Determine the impairment loss, if any, to be recorded on December 31, 2015.
(c) Assume that the recoverable amount of the Conchita Division is $1,600,000 instead of $1,850,000.
Determine the impairment loss, if any, to be recorded on December 31, 2015.
(d) Prepare the journal entry to record the impairment loss, if any, and indicate where the loss would be
reported in the income statement.