EXPLAIN THE FOLLOWING. GIVE SOLUTION IN PROPER FORM IF NEEDED.

Which of the following is not true?

a. License fees are recognized over time for any license that is viewed as providing a right of access.

b. Licensing fees are recognized as revenue over time for any licenses for which the seller expects its

ongoing activities to affect the benefits that the buyer receives from intellectual property.

c. License fees are recognized as revenue at a point in time if the buyer expects that the seller's future

activities will not affect the benefit the buyer derives from the intellectual property.

d. Licensing fees always are recognized as revenue at the end of the license period, when the seller

has completed its performance obligation to provide access to its intellectual property.

Tony &Jr. is a CPA firm that provides proprietary software to its clients. One of its software packages sells

for P150 and contains pre-programmed tutorials on basic accounting concepts. Another product sells

for P3,000 and contains Tony &Jr. archive of accounting standards and articles, which Tony & Jr.

updates on a weekly basis and downloads to archive users for the two years following purchase of the

product. If a customer purchases both software packages on June 1, 20x6, how much revenue should

Tony &Jr. recognize for the year 20x6?

a. None c. P 875

b. P 150 d. P1,025

0. KImdrei developed software that helps farmers to plow their fields in a manner that prevents erosion

and maximizes the effectiveness of irrigation. Anton paid a licensing fee of P20,000 for a copy of the

software. Although Anton can use the software as long as it wants, KImdrei expects that Anton will use

the software for approximately 5 years. KImdrei does not anticipate any further interaction with Anton

following transfer of the license. How much revenue should KImdrei recognize in the first year of the

contract?

a. Zero c. P 5,000

b. P4,000 d. P20,000

Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a

start-up biotechnology company called Chris HealthPro and promises to:

a) Grant Chriis HealthPro the exclusive rights to use Pfizer's Technology A for the life of its patent. The

license gives Chris HealthPro the exclusive right to market, distribute, and manufacture Drug B as

developed using Technology A.

b) Assign four full-time equivalent employees to perform research and development services for Chris

HealthPro in a specially designated Pfizer lab facility. The primary objective of these services is to

receive regulatory approval to market and distribute Drug B using Technology A. Chris HealthPro is

required to use Pfizer's lab to perform the research and development services necessary to develop

Drug B using Technology A, because the expertise related to Technology A is proprietary to Pfizer

and not available elsewhere.

Given the information above, how many performance obligations regarding the license and the R&D

services to Chris HealthPro?

a. None c. Two

b. One d. Three

The ReSA Singing Group League (RSGL) licenses its trademark to ReSA Logo. Under the license

arrangement, ReSA Logo pays the RSGL a P1,000,000 initial license fee plus a bonus when annual sales of

ReSA Logo merchandise reach a threshold. The license agreement is for 4 years.

12. How much of the P1,000,000 initial license fee should the RSGL recognize as revenue in the first year of

the contract?

a. Zero c. P1,000,000

b. P250,000 d. Cannot tell from information given

. Assume that the RSGL anticipates that, in addition to receiving the P1,000,000 million license fee, it will

receive a bonus of P2,000,000 in year 1 of the contract and a bonus of P3,000,000 in years 2-4 of the

contract based on ReSA Logo's sales. Also assume that the RSGL is convinced that it is probable there

will not be a significant reversal of any revenue recognized with respect to the bonus in subsequent

periods. At the inception of the contract, what is the amount of transaction price that the RSGL would

estimate with respect to this license arrangement?

a. Zero c. P 3,000,000

b. P1,000,000 d. P12,000,000