Exercise 6 - Goodwill Direct approach Todoroki Inc. is considering the acquisition of the net assets of Yaoyoruza Co. Both parties agreed to decide on the acquisition cost by measuring goodwill under the direct approach. Yaoyoruza has the following data available for the computation of goodwill: Total assets P 5,000,000 Total liabilities 2,000,000 Normal rate of return 10% Yaoyoruza reported the following income figures for the past five years: 2016 P 300,000 2017 P 350,000 2018 P 310,000 2019 P 390,000 2020. P 370,000 Requirements: Determine the amount of goodwill under the four different methods under the direct approach. 1. Purchase of average excess earnings 2. 20% capitalization of average excess earnings 3. 10% capitalization of average earnings 4. Present value methodExercise 3 Copyright I On January 1, 2020, Ulfric purchased a copyright that grants him the rights for the production of a musical piece within a 5 year period, the purchase price was P1,500,000. He also paid the following costs: Acquisition related employee benefits Er incentives P 100,000 Advertising cost 200,000 Business relocation costs 520,000 Selling and administrative costs 400,000 Professional fees. 800,000 Ulfric adopted the writeoff or: rst sale approach in amortizing the copyright. The revenues from initial sale of the copyrighted piece of art was recognized in 2021. Required: From the above expenditures, what amount of copyright can be capitalized? Exercise 4 Other intangible assets Rikke Corp. had the following expenditures on January 1, 2020: Legal costs of P100000 for acquiring a broadcasting license for 10 years. Rikke will indenitely renew the license for 10 years each. Costs of P250,000 to register airline rights for 15 years. Rikke has no intention of renewing after expiration. Purchased a customer list for P60,000 to be used in product marketing and direct selling. The list has a useful life of 3 years. Research costs before technological feasibility for a computer software, P150,000 and cost of coding, testing and cost of product masters P300,000. The computer software has a useful life of 5 years and is amortized on a straight line basis. Required: Prepare the necessary journal entries to record the transactions of Rikke Corp. in 2020. All intangible assets that are subject to amortization [finite life) uses the straight line method of amortization. Exercise 5 - Goodwill Residual approach All Might Corp. acquired the net assets of Midon'ya Company on January 1, 2020 for P3,000,000 cash. The fair value for all of Midoriya's assets were as follows: Loans and receivables P 500,000 Inventories 1,800,000 Property, plant and equipment 5,600,000 Midoriya had the following liabilities at their fair value: Short-term loans and payables P 300,000 Long-term liabilitites 5,000,000 Requirements: 1. Determine the amount of goodwill that resulted from the acquisition under the residual approach. 2. Prepare the journal entry in the books of All Might Corp. to record the acquisition. ENEI'CiSE 1 - Patent I In 2020, Dragonbom Co. incurred developed costs on a patent for P100000 cash and paid P1,000,000 for its patent application 84 licensing in January 1, 2020. On December 31, 2021, Dragonborn Co. successfully defended a lawsuit from Altmers Corp and paid P50.000 in attorney's fees. On January 1, 2023, the company acquired a competing patent for \"$5,000 On January 1, 2025 the company acquired a related patent for P150000, it extended the life of the original patent for 5 more years. Dragonborn uses the straight line method in amortization of patents. Required: Prepare the journal entries for the years 2020 2025 related to the patent. Exercise 2 Franchise On January 1, 2020, Aela Company acquired a 20 year franchise to operate a Jollibee food outlet by paying an initial franchise fee of P12,000,000, of which P2,000,000 is payable in cash and the remaining sum to be paid in a 12% non-interest bearing note payable in 5 equai installments every December 31 starting in 2020. The initial franchise fees is a payment far initial services of the franchisor to Aeia, it includes assistance in nding a suitable store location, advertising, training staff, machinery 3: equipment, supplies and other preparations for initial operations. The franchise contract also provides for Aeia to pay a 5% periodic franchise fee based on gross sales, Aela is obliged to pay at the end of each year based on agreement. The Jollibee food outlet operated by Aela Company reported 20,000,000 sales for the year 2020. Required: Prepare the necessary journal entries in the books of the franchisee, Aeia Company to record the transactions related to the franchise in 2020