29. On January 1, 2020, Five signed an agreement to

operate as franchisee of Clear Copy Service, Inc. for an

initial franchise of P680,000. Of this amount,

P200,000 was paid when the agreement was signed

and the balance was payable in four annual payments

of P120,000 each, beginning January 1, 2021. The

agreement provides that the down payment is not

refundable and no future services are required of the

franchisor. The implicit rate for loan of this type is

14%. The agreement also provides the 5% of the

revenue from the franchise must be paid to the

franchisor annually. Five's revenue from the franchise

for 2020 was P8,000,000. Five estimates the useful

life of the franchise to be ten years. The carrying

amount of franchise as of December 31, 2020 is

a. P494,680 c. P549,644

b. P538,733 d. P612,000

30. UR Company purchased a customer database and a

formula for a new fuel substitute for diesel fuel for a

total of P100,000. UR Company uses the expected

cash flow approach for estimating the fair value of

these two intangibles. The appropriate interest rate is

5%. The potential future cash flows from the two

intangibles, and their associated probabilities, are as

follows:

Customer Database:

Outcome 1 - 20% probability of cash flows of P10,000

at the end of each year for 5 years.

Outcome 2 - 30% probability of cash flows of P2,000

at the end of each year for 4 years.

Outcome 3 - 50% probability of cash flows of P200 at

the end of each year for 3 years.

Formula:

Outcome 1 - 10% probability of cash flows of P50,000

at the end of each year for 10 years.

Outcome 2 - 30% probability of cash flows of P30,000

at the end of each year for 4 years.

Outcome 3 - 60% probability of cash flows of P10,000

at the end of each year for 3 years.

How much should be recognized as customer

database?

a. P11,060 c. P11,295

b. P13,137 d. P 0

31. Which statement is incorrect regarding intangible

assets contained in or on a physical substance such as

a compact disc (in the case of computer software),

legal documentation (in the case of a license or patent)

or film?

a. In determining whether an asset that incorporates

both intangible and tangible elements should be

treated property, plant and equipment or as an

intangible asset, an entity uses judgment to assess

which element is more significant.

b. Computer software for a computer-controlled

machine tool that cannot operate without that

specific software is an integral part of the related

hardware and it is treated as property, plant and

equipment.

c. When the software is not an integral part of the

related hardware, computer software is treated as

an intangible asset.

d. The operating system of a computer is treated as

an intangible asset.

32. On 1 January 2020 an entity purchased a new software

package to operate its production equipment for

P600,000, including P50,000 refundable purchase

taxes. The purchase price was funded by incurring a

loan of P605,000 (including P5,000 loan origination

fees). The loan is secured against the software

licenses.

In January 2020 the entity incurred the following costs

in customizing the software so that it is more suited to

the systems used by the entity:

Labor - P120,000

Depreciation of plant and equipment used to

perform the modifications - P15,000.

In January 2020 the entity's production staff were

trained in how to operate the new software. Training

costs included:

Cost of an expert external instructor - P7,000

Labor - P3,000.

In February 2020 the entity's production team tested

the software and the information technology team

made further modifications necessary to get the new

software to function as intended by management. The

following costs were incurred in the testing phase:

Material, net of P3,000 recovered from the sale of

the scrapped output - P21,000

Labor - P11,000

Depreciation of plant and equipment while it was

used to perform the modifications - P5,000.

The new software was ready for use on 1 March 2020.

However, because of low initial order levels, the entity

incurred a loss of P23,000 on operating the software

during March.

What is the cost of the software?

a. P550,000 c. P722,000

b. P685,000 d. P732,000

33. Pagsanjan Company incurred costs to develop and

produce a routine, low-risk computer software product

as follows:

Completion of detail program design P1,500,000

Cost incurred for coding and testing to

establish technological feasibility

500,000

Other coding costs after establishment of

technological feasibility

2,500,000

Other testing costs after establishment of

technological feasibility

2,000,000

Costs of producing product masters for

training materials

3,000,000

Duplication of computer software and

training materials from product master

4,000,000

Packaging product 1,000,000

What amount should be capitalized as software cost

subject to amortization?

a. P7,500,000 c. P4,500,000

b. P9,500,000 d. P8,000,000