EXERCISE 5

Elasto Painters Company began operations on January 2, 20x7. Shown below is part of the company's trial balance

on December 31, 20x15.

Patents 1,650,000

Franchise agreement 285,000

Organization costs 306,000

Goodwill 1,035,000

The following are made available:

Patents

The patents, acquired January 2, 20x8, and have an expected useful life of 14 years. Improvements made to

equipment covered by the patents costing P250,000 were debited to the account in January 20x12. Was never

recorded by the company.

Franchise Agreement

A franchise agreement was signed on January 1, 20x15. A P150,000 fee was paid, covering a 5- year period, at the

end of which the company may renew the agreement by paying P150,000. A decision on renewal has not been

made as of December 31, 20x15. The agreement calls for an annual payment of 5% of revenue.

Organization Costs

Organization costs include the unamortized portion of amounts paid to promote for services rendered at the

inception of the corporation. These fees have been amortized, since inception, over an estimated 40-years life. The

decision is made, as of December 31, 20x15, to reduce the total period of amortization of organization costs to 12

years.

Goodwill

The goodwill account includes the following:

P135,000 - Legal expenses relative to incorporation. These were assigned to the account in January 20x7.

P600,000 - Excess of cost over assigned net asset values of an enterprise acquired in early 20x13 expected to

be of value for an indefinite period.P300,000 - Paid to an advertising consulting firm in early 20x14 for a major advertising effort expected to be

beneficial for an indefinite period.

No amortization has been taken on any amount in the Goodwill account.

1. What is the total Patents amortization for 20x15?

2. What is the carrying value of the Patents on December 31, 20x15?

3. What is the carrying value of the Franchise Agreement on December 31, 20x15?

4. What is the carrying value of the Organization Costs on December 31, 20x15?

5. What is the carrying value of Goodwill on December 31, 2015?