Problem 12 3 (Part Level Submission) Bramble Corporation, a private entity reporting under ASPE, was incorporatedon January 3, 2016. The corporation's financial statements for its first year of operations were not examined by a public accountant. You have been engaged to audit the financial statements for the year ended December 31, 2017, and your audit is alrmost complete. The corporation's trial balarice is as folows: BRAMBIF Trial Ralance December 31, 2017 Debit Credit Cash Accounts receivable Allowance for doubttul accounts Inventory Machinery Equipment 57 LOD 85,000 1,000 61,200 82,000 33,000 29,000 Leasehold improvements Prepaid expenses Goodwill Intangible assets-licensing agreement No. 1 Intangible assets-licensing agreement No. 2 Accounts payable Uneamed revenue Comumon shares 120,200 32,900 12,000 29,000 55,500 53,000 93,000 17,280 200,000 Retained earrings, January 1, 2017 162,220 708.000 473,000 184,000 Cost of goods sold Interast expense 1,310,300 1,31D,300 Tha follawing infarmation is far accounts that may still need adjustment: 1. Patents for Bramble's manufacturing process were acquired on January 2, 2017, at a cost of s02,000. An additional $33,000 was spent in July 2017 and $5,200 in December 2017 to improve machinery covered by the patents and was charged to the Intangible Assets -Patents account. Depreciation on fixed assets was properly recorded for 2017 in accordance with Bramble's practice, wich is to take a full year of depreciation for property on hand at June 30. No other depreciation or amortization was recorded. Bramble uses the straight-line method for all amortization and amortizes its patents over Lheir legal life, which was 17 years when the patent was granted. Accumulate all amurtization expense in orne incorne statement account. 2. At December 31, 2017, management determined that the undiscounted future net cash flows that are expected from the use of the patent would be $80,000, the value in use was $75,000, the resale value of the patent was approximately $55,000, and disposal costs would be $4,000 3. On anuary 3, 2016, Bramble purchased licensing agreement no. 1, which manacement believed had an unlimited useful life. Licences similar to this are frequerntly bought and sold. Bramble could only clearly iderntify cash flows from agreement no. 1 for 15 years After the 15 years, further cash fiows are still possible, but are uncertain. The balance in the Licences account includes the aqreement's purchase price of 52,500 and expenses of $3,000 related to the acquisitian. On January 1, 2017, Bramble purchased licensing agreement no. 2, which has a life expectancy of five years. Tha balance in tha Licances account includes its $50,0O0 purchase price and ,DD in acquisition expenses, but it has becn reduced by a credit af $4,000 for the advance collection of 2018 ravenue from the agreement n late December 2016, an exp asan causad permanent 0 reduction in the expected rmenue producng va ua o licansing aqreemn t na 1 n anuary 2018, a fiand caused additional damage that rendered the agreament worthless. 4. The balance in the Goodwill account resuits trom legal expenses of $29,000 that were incurred for Dramble's incorperation on January 3, 2015. Management assumes that the $29,000 cost will beneit the entire lite of the crganization, and believes that these costs should be amortized over a limited life of 30 years. No entry has been made yet S. The Leasehold Improvements account includes the following (i) There is a $13,000 cost of improvements that Bramble made to premises that it leases as a tenant. The improvements were made in January 2016 and have a useful life of 12 years. ii) Movable assermbly-line equipment costina $13,000 was installed in the leased premises in December 2017 i) Real estate taxes of $G,9D0 ware paid by Bramble in 2017, but they shauld have hean paid by the landlord under the terms af the lease agreement. aran hle paid its rent in ull during 2017. A 10-year non-ra abla ease was signed nn January 3 2016 for e leased huilding that Fra le uses n manufa ng n rations amonza en cr reciation has heen recorded on any mounts nia e to the lease nr 6. Included in selling expenses are the following costs incurred to develop a new product. Brable hopes to establish the technical, financial, annd commercial viability of this project in fiscal 2018. Salaries of two employees who spend approximately 50% of their time on research and development initiatives (this amount represents their full salary) Materials cunsumed $100,000 35,000 Complete the eight-column work sheet to adjust the accounts that require adjustment. (Round answers to O decimal places, e-g. 5,275.) Stmt Fin Debit Trial Balance Adjustments Income Statement Position General Ledger Account Credit Credit Credit Debit Credit Cash Accounts Receivable Allowance for Doubttul Accounts Inventory Machinery Accumulated Depredation Prepaid Expanses Intangible Assets Licenses Accounts Payable Uneamed Revenue Common Shares Retained earnings, January 1, 2017 Cost of Gonds Sclod Salling Expenses Interest Expense Totals Research and Development Expense Acc. Amort. Fatents Acc. Imp. Losses- Patents Acc. Dep. Leasehold Improvement Acc. Amort. Licensas Loss on Impalrment Acc. Imp. Losses. - Licences Depretiation Expense Amortization Expense Net loss for 2017 Totals Problem 12 3 (Part Level Submission) Bramble Corporation, a private entity reporting under ASPE, was incorporatedon January 3, 2016. The corporation's financial statements for its first year of operations were not examined by a public accountant. You have been engaged to audit the financial statements for the year ended December 31, 2017, and your audit is alrmost complete. The corporation's trial balarice is as folows: BRAMBIF Trial Ralance December 31, 2017 Debit Credit Cash Accounts receivable Allowance for doubttul accounts Inventory Machinery Equipment 57 LOD 85,000 1,000 61,200 82,000 33,000 29,000 Leasehold improvements Prepaid expenses Goodwill Intangible assets-licensing agreement No. 1 Intangible assets-licensing agreement No. 2 Accounts payable Uneamed revenue Comumon shares 120,200 32,900 12,000 29,000 55,500 53,000 93,000 17,280 200,000 Retained earrings, January 1, 2017 162,220 708.000 473,000 184,000 Cost of goods sold Interast expense 1,310,300 1,31D,300 Tha follawing infarmation is far accounts that may still need adjustment: 1. Patents for Bramble's manufacturing process were acquired on January 2, 2017, at a cost of s02,000. An additional $33,000 was spent in July 2017 and $5,200 in December 2017 to improve machinery covered by the patents and was charged to the Intangible Assets -Patents account. Depreciation on fixed assets was properly recorded for 2017 in accordance with Bramble's practice, wich is to take a full year of depreciation for property on hand at June 30. No other depreciation or amortization was recorded. Bramble uses the straight-line method for all amortization and amortizes its patents over Lheir legal life, which was 17 years when the patent was granted. Accumulate all amurtization expense in orne incorne statement account. 2. At December 31, 2017, management determined that the undiscounted future net cash flows that are expected from the use of the patent would be $80,000, the value in use was $75,000, the resale value of the patent was approximately $55,000, and disposal costs would be $4,000 3. On anuary 3, 2016, Bramble purchased licensing agreement no. 1, which manacement believed had an unlimited useful life. Licences similar to this are frequerntly bought and sold. Bramble could only clearly iderntify cash flows from agreement no. 1 for 15 years After the 15 years, further cash fiows are still possible, but are uncertain. The balance in the Licences account includes the aqreement's purchase price of 52,500 and expenses of $3,000 related to the acquisitian. On January 1, 2017, Bramble purchased licensing agreement no. 2, which has a life expectancy of five years. Tha balance in tha Licances account includes its $50,0O0 purchase price and ,DD in acquisition expenses, but it has becn reduced by a credit af $4,000 for the advance collection of 2018 ravenue from the agreement n late December 2016, an exp asan causad permanent 0 reduction in the expected rmenue producng va ua o licansing aqreemn t na 1 n anuary 2018, a fiand caused additional damage that rendered the agreament worthless. 4. The balance in the Goodwill account resuits trom legal expenses of $29,000 that were incurred for Dramble's incorperation on January 3, 2015. Management assumes that the $29,000 cost will beneit the entire lite of the crganization, and believes that these costs should be amortized over a limited life of 30 years. No entry has been made yet S. The Leasehold Improvements account includes the following (i) There is a $13,000 cost of improvements that Bramble made to premises that it leases as a tenant. The improvements were made in January 2016 and have a useful life of 12 years. ii) Movable assermbly-line equipment costina $13,000 was installed in the leased premises in December 2017 i) Real estate taxes of $G,9D0 ware paid by Bramble in 2017, but they shauld have hean paid by the landlord under the terms af the lease agreement. aran hle paid its rent in ull during 2017. A 10-year non-ra abla ease was signed nn January 3 2016 for e leased huilding that Fra le uses n manufa ng n rations amonza en cr reciation has heen recorded on any mounts nia e to the lease nr 6. Included in selling expenses are the following costs incurred to develop a new product. Brable hopes to establish the technical, financial, annd commercial viability of this project in fiscal 2018. Salaries of two employees who spend approximately 50% of their time on research and development initiatives (this amount represents their full salary) Materials cunsumed $100,000 35,000 Complete the eight-column work sheet to adjust the accounts that require adjustment. (Round answers to O decimal places, e-g. 5,275.) Stmt Fin Debit Trial Balance Adjustments Income Statement Position General Ledger Account Credit Credit Credit Debit Credit Cash Accounts Receivable Allowance for Doubttul Accounts Inventory Machinery Accumulated Depredation Prepaid Expanses Intangible Assets Licenses Accounts Payable Uneamed Revenue Common Shares Retained earnings, January 1, 2017 Cost of Gonds Sclod Salling Expenses Interest Expense Totals Research and Development Expense Acc. Amort. Fatents Acc. Imp. Losses- Patents Acc. Dep. Leasehold Improvement Acc. Amort. Licensas Loss on Impalrment Acc. Imp. Losses. - Licences Depretiation Expense Amortization Expense Net loss for 2017 Totals