Chapter 12: Q31. (page 610)
In what situation will the unrealized holding gain or loss on inventory be reported in income?
Unrealized holding gain is reported in income only when it has a qualifying fair value.
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Research and development activities may include (a) personnel costs, (b) materials and equipment costs, and (c) indirect costs. What is the recommended accounting treatment for these three types of R&D costs?
Question: Michek Company loans Sarasota Company \(2,000,000 at 6% for 3 years on January 1, 2017. Michek intends to hold this loan to maturity. The fair value of the loan at the end of each reporting period is as follows.
December 31, 2017 \)2,050,000
December 31, 2018 2,020,000
December 31, 2019 2,000,000
Prepare the journal entry(ies) at December 31, 2017, and December 31, 2019, for Michek related to these bonds, assuming (a) itdoes not use the fair value option, and (b) it uses the fair value option. Interest is paid on January 1.
Question: (Recording and Amortization of Intangibles) Marshall Company, organized in 2016, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2017.
1/2/17 | Purchased patent (8-year life) | \( 350,000 |
4/1/17 | Purchase goodwill (indefinite life) | 360,000 |
7/1/17 | Purchased franchise with 10-year life; expiration date 7/1/27 | 450,000 |
8/1/17 | Payment of copyright (5-year life) | 156,000 |
9/1/17 | Research and development costs | 215,000 |
\)1,531,000 |
Instructions
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2017, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.)
Question: Treasure Land Corporation incurred the following costs in 2017.
Cost of laboratory research aimed at the discovery of new knowledge | \(120,000 |
Cost of testing in search for product alternatives | 100,000 |
Cost of engineering activity required to advance the design of a product to the manufacturing stage | 210,000 |
Prototype testing subsequent to meeting economic viability | 75,000 |
\)505,000 |
Prepare the necessary 2017 journal entry(ies) for Treasure Land.
Question: Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of \(400,000. The Johnson Division’s net assets, including the goodwill, have a carrying amount of \)800,000. The fair value of the division is estimated to be $1,000,000. Prepare Waters’ journal entry, if necessary, to record impairment of the goodwill.
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