1. As the recently appointed auditor for Muning Ltd., you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2019, are prepared. The controller for Muning mentions that only one account is kept for intangible assets.

Intangible Assets

Debit Credit Balance

Jan. 4 Research and development costs (prior to achieving economic viability) 940,000 940,000

Jan.5 Legal costs to obtain patent 75,000 1,015,000

Jan. 31 Payment of 7 months' rent on property leased by Hillary 91,000 1,106,000

Feb. 11 Share premium on ordinary shares 250,000 856,000

March 31 Unamortized bond discount on bonds due March 31, 2030 84,000 940,000

April 30 Promotional expenses related to start-up of business 207,000 1,147,000

June 30 Operating losses for first 6 months 141,000 1,288,000

Required

Prepare the entry or entries necessary to correct this account. Assume that the patent has a useful life of 12 years.

2.Presented below is selected information for Ragdoll Company.

1. Ragdoll purchased a patent from Vania Co. for P1,500,000 on January 1, 2017. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2027. During 2019, Ragdoll determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the statement of financial position for the patent, net of accumulated amortization, at December 31, 2019?

2. Ragdoll bought a franchise from Dougherty Co. on January 1, 2018, for P350,000. The carrying amount of the franchise on Dougherty's books on January 1, 2018, was P500,000. The franchise agreement had an estimated useful life of 30 years. Because Ragdoll must enter a competitive bidding at the end of 2027, it is unlikely that the franchise will be retained beyond 2027. What amount should be amortized for the year ended December 31, 2019?

3. On January 1, 2017, Ragdoll incurred organization costs of P275,000. What amount of organization expense should be reported in 2019?

4. Ragdoll purchased the license for distribution of a popular consumer product on January 1, 2019, for P150,000. It is expected that this product will generate cash flows for an indefinite period of time. The license has an initial term of 5 years but by paying a nominal fee, Ragdoll can renew the license indefinitely for successive 5-year terms. What amount should be amortized for the year ended December 31, 2019?

Required

Answer the questions asked about each of the factual situations

3.In early January 2018, Persian Corporation applied for a trade name, incurring legal costs of P18,000. In January 2019, Persian incurred P7,800 of legal fees in a successful defense of its trade name.

Required:

a. Compute 2018 amortization, 12/31/18 book value, 2019 amortization, and 12/31/19 book value if the company amortizes the trade name over 10 years.

b. Compute the 2019 amortization and the 12/31/19 book value, assuming that at the beginning of 2019, Persian determines that the trade name will provide no future benefits beyond December 31, 2022.

c. Ignoring the response for part b, compute the 2020 amortization and the 12/31/20 book value, assuming that at the beginning of 2020, based on new market research, Persian determines that the recoverable amount of the trade name is P16,000.