Problem 12-3 (Part Level Submission) Bramble Curperation, a private entity reporting under ASPE, was incorporated on January 3, 2016. The corporation's financial statements for its first year of cperations were not examined by a public accounitant. You have been engaged to audit the financial statements for the year ended Decermber 31, 2017, and your audit is almost complete. The corporation's trial balance is as fellows: BRAMBLE CORPORATION Trial Balance December 31, 2017 Accounts receivable Allowance for doubttul accounts 1,800 28,000 Intangible assets-patents Leasehold improvements Prepaid experises Intangible assets-liceising agreement No. 1 Intangible assets-lkensing agreement No. 2 Accounts payable Unearned revanue Common shares Retained earnings, January 1, 2017 93,000 17,280 300,000 162,220 708,000 Cost of goods sold 5el ng expenses Interest expense 473,000 184,000 27,500 $1,310,200 1,310,200 The fallowing informatian is for accnunts that may still need adjustment: 1 Patents or Brambles manufacturing process were acquired on aruary 2 2017 at Assets Patents account. Depreciation on fixed assets was properly recorded for 2017 in accordance with Bramble's practice, which is to take a full year of depreciation for property on hand at June 30. No other depreciation or amartization was recorded. Bramble uses the straight inc mcthad far all amortization and amortizes its patents over their legal life, which was 17 years when the patent was granted. Acoumulate all amartization expense in one income statement account AL December 1 2017, managemen de ermined ha he undiscounted u ure nel cash nuws that are expected rum the use u he p en be $90,000 thu value in use as $/5 000, uie tesa e value o he would be $4,000 cost 82,000 An addit ona S33,000 was spent in uly 2017 and5,200 in December 2017 to improve machinery covered by the patents and was charged to the Intangible 2. Lent was appruxrnately $55,000 and depusal custs 3. On January 3, 2016, Dramble purchased licensing agreement no. 1, which management believed had an unlimited useful life. Licenoes similar to this are frequently bought and sold. Dramble could only dlearly identify cash flows from agreement no. 1 for 15 years A er the 15 years, further cash ows are still possible, but are uncertain. The balance in the Licences account includes the agreement's purchase price o 52,500 and expenses o s3.000 related to the acquisition On January 1, 2017 Bramble chased licensing agreement na 2 which has a life expectancy of five ears. The balance in the Licences account includes its 5 D 0 purchase price and $7, a in acquisition expenses, but it has bnen reduced by a credit of $4,00 or the advance collection nf 2D18 revenue frnm the agreement n late December 2 B an explosion caused a permanent 0% reduction in the expected revenue producing valuc licansing agreement no 1 n anuary 2018, nod caused additional damage that rendem the agreement wo hless. 4. The balance in the Goodwill account results from legal expenses of $29,000 that were incurred for Bramble's incorporation on January 3, 2016. Management assumes that the $29,000 cost will benetit the entire life of the organization, and believes that these costs should be amortized aver a limited life of 30 years. No entry has been made yet 5. The Leasehold Improvements account Indudes the following: (i) (ii) Ihere is a S13,aou cast ofimprovements that-ramble made toremiscs that it leases as a tenant. Ihe i provements were made in January 201 and have a useful life of 12 years. Movable assembly-line equipment costing $13,000 was installed in the leased premises in December 2017 Real estate taxes of $6,900 were paid by Bramble in 2017, but they should have been paid by the landord under the terms of the lease agreement 6. Included in selling expenses are the following costs incurred to develop a new product. Bramble hopes to establish the technical, financial, and commercial viability of this project in fiscal 2018 Evelop a Salaries of two ermployees who spend approximately 50% ofheir Lime on research and development initiatives (this amount represents their full salary) $100,000 35,000 Materials consumed Complete the eight-column work sheet to adjust the accounts that require adjustment. (Round answers to 0 decimal places, e.g. 5,275.) Trial Ralance Stmt Fin Position General Ledger Account Debit Credit Debit Credit Debit Credit Credit Cash Allowance for Doubttul Accounts Machinery Equipment Patents Prepaid Expenses Goodwill Intangible Assets -Licenses Accounts Payable Unearned Revenue Comman Shares Retained earnings, January1, 2017 Sales Cost of Goods Sold Selling Expenses Interest Expense Totals Research and Development Expense Acc. Amort. Pat Acc. Imp. Loases Patents Acc. Dep, - Leasehold Improvements Acc. Amort. Licenses Loss on Impairment Acc. Imp. Losses-Licances ents reciation Expense Amortization Expense Net loss for 2017 Totals Problem 12-3 (Part Level Submission) Bramble Curperation, a private entity reporting under ASPE, was incorporated on January 3, 2016. The corporation's financial statements for its first year of cperations were not examined by a public accounitant. You have been engaged to audit the financial statements for the year ended Decermber 31, 2017, and your audit is almost complete. The corporation's trial balance is as fellows: BRAMBLE CORPORATION Trial Balance December 31, 2017 Accounts receivable Allowance for doubttul accounts 1,800 28,000 Intangible assets-patents Leasehold improvements Prepaid experises Intangible assets-liceising agreement No. 1 Intangible assets-lkensing agreement No. 2 Accounts payable Unearned revanue Common shares Retained earnings, January 1, 2017 93,000 17,280 300,000 162,220 708,000 Cost of goods sold 5el ng expenses Interest expense 473,000 184,000 27,500 $1,310,200 1,310,200 The fallowing informatian is for accnunts that may still need adjustment: 1 Patents or Brambles manufacturing process were acquired on aruary 2 2017 at Assets Patents account. Depreciation on fixed assets was properly recorded for 2017 in accordance with Bramble's practice, which is to take a full year of depreciation for property on hand at June 30. No other depreciation or amartization was recorded. Bramble uses the straight inc mcthad far all amortization and amortizes its patents over their legal life, which was 17 years when the patent was granted. Acoumulate all amartization expense in one income statement account AL December 1 2017, managemen de ermined ha he undiscounted u ure nel cash nuws that are expected rum the use u he p en be $90,000 thu value in use as $/5 000, uie tesa e value o he would be $4,000 cost 82,000 An addit ona S33,000 was spent in uly 2017 and5,200 in December 2017 to improve machinery covered by the patents and was charged to the Intangible 2. Lent was appruxrnately $55,000 and depusal custs 3. On January 3, 2016, Dramble purchased licensing agreement no. 1, which management believed had an unlimited useful life. Licenoes similar to this are frequently bought and sold. Dramble could only dlearly identify cash flows from agreement no. 1 for 15 years A er the 15 years, further cash ows are still possible, but are uncertain. The balance in the Licences account includes the agreement's purchase price o 52,500 and expenses o s3.000 related to the acquisition On January 1, 2017 Bramble chased licensing agreement na 2 which has a life expectancy of five ears. The balance in the Licences account includes its 5 D 0 purchase price and $7, a in acquisition expenses, but it has bnen reduced by a credit of $4,00 or the advance collection nf 2D18 revenue frnm the agreement n late December 2 B an explosion caused a permanent 0% reduction in the expected revenue producing valuc licansing agreement no 1 n anuary 2018, nod caused additional damage that rendem the agreement wo hless. 4. The balance in the Goodwill account results from legal expenses of $29,000 that were incurred for Bramble's incorporation on January 3, 2016. Management assumes that the $29,000 cost will benetit the entire life of the organization, and believes that these costs should be amortized aver a limited life of 30 years. No entry has been made yet 5. The Leasehold Improvements account Indudes the following: (i) (ii) Ihere is a S13,aou cast ofimprovements that-ramble made toremiscs that it leases as a tenant. Ihe i provements were made in January 201 and have a useful life of 12 years. Movable assembly-line equipment costing $13,000 was installed in the leased premises in December 2017 Real estate taxes of $6,900 were paid by Bramble in 2017, but they should have been paid by the landord under the terms of the lease agreement 6. Included in selling expenses are the following costs incurred to develop a new product. Bramble hopes to establish the technical, financial, and commercial viability of this project in fiscal 2018 Evelop a Salaries of two ermployees who spend approximately 50% ofheir Lime on research and development initiatives (this amount represents their full salary) $100,000 35,000 Materials consumed Complete the eight-column work sheet to adjust the accounts that require adjustment. (Round answers to 0 decimal places, e.g. 5,275.) Trial Ralance Stmt Fin Position General Ledger Account Debit Credit Debit Credit Debit Credit Credit Cash Allowance for Doubttul Accounts Machinery Equipment Patents Prepaid Expenses Goodwill Intangible Assets -Licenses Accounts Payable Unearned Revenue Comman Shares Retained earnings, January1, 2017 Sales Cost of Goods Sold Selling Expenses Interest Expense Totals Research and Development Expense Acc. Amort. Pat Acc. Imp. Loases Patents Acc. Dep, - Leasehold Improvements Acc. Amort. Licenses Loss on Impairment Acc. Imp. Losses-Licances ents reciation Expense Amortization Expense Net loss for 2017 Totals