E 12-1, 12-4, 12-5, 12-12, 12-16
12-1
A) 10, 13,15,16,17,19,23 B) 1. Long-term investment/Balance Sheet
2. Property, Plant, Equipment/Balance Sheet
3. Research and Development Expense/Income Statement
4. Current Asset (prepaid rent)/Balance Sheet
5. Property, Plant, Equipment/Balance Sheet
6. Research and Development/Income Statement
7. Charged as expense in the Income Statement
8. Operating Losses in the Income Statement
9. Charged as expense in the Income Statement
11. Not recorded; any costs related to creating goodwill incurred internally must be expense.
12. Research and Development Expense/Income Statement
14. R & D Expense/Income Statement
18. R & D Expense/Income Statement
20. R & D Expense/Income Statement
21. Long-term investment, or other assets, in the Balance Sheet
22. Expensed in the Income Statement.
12-4
1. Palmiero should report that patent at $900,000 (net of $600,000 accumulated amortization) on the balance sheet. The computation of accumulated amortization is as follows:
Amortization for 2010 & 2011 (1,500,000/10) X 2 = $300,000
2010 Amortization (1,500,000-300,000) / (6-2) = $300,000
Accumulated Amortization, 12/31/12 $600,000 2. Palmiero should amortize the franchise over its estimated useful life. Palmiero is uncertain it will retain the franchise until 2020. Amortized will be over 10 years 12/31/12 ($300,000/10)=$35,000 3. The costs should be expensed as incurred. Therefore $275,000 of organization expense was reported in income for 2010 with none expensed in 2012. 4. The license can be easily renewed (at nominal cost), it has an indefinite life. No amortization will be recorded.
12-5
Research and Development Expense………………………………..940,000
Patents………………………………………………………………..75,000
Rent Expense [(5/7) x 91,000]……………………………………….65,000
Prepaid Rent [(2/7) x