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Chapter 12: Q24. (page 610)
Explain how to account for the impairment of held-to-maturity debt security.
Whenever the impairment of the held-to-maturity happens, then the amount of that security is written down on its fair value.
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Stephan Curry, Inc., spent \(68,000 in attorney fees while developing the trade name of its new product, the Mean Bean Machine. Prepare the journal entries to record the \)68,000 expenditure and the first year’s amortization, using an 8-year life.
On January 1, 2017, Hi and Lois Company purchased 12% bonds having a maturity value of \(300,000 for \)322,744.44. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Hi and Lois Company uses the effective interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Instructions
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare a bond amortization schedule.
(c) Prepare the journal entry to record the interest revenue and the amortization at December 31, 2017.
(d) Prepare the journal entry to record the interestand the amortization at December 31, 2018.
The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.
The following is a list of items that could be included in the intangible assets section of the balance sheet.
1. Investment in a subsidiary company.
2. Timberland.
3. Cost of engineering activity required to advance the design of a product to the manufacturing stage.
4. Lease prepayment (6 months’ rent paid in advance).
5. Cost of equipment obtained.
6. Cost of searching for applications of new research findings.
7. Costs incurred in the formation of a corporation.
8. Operating losses incurred in the start-up of a business.
9. Training costs incurred in start-up of new operation.
10. Purchase cost of a franchise.
11. Goodwill generated internally.
12. Cost of testing in search for product alternatives.
13. Goodwill acquired in the purchase of a business.
14. Cost of developing a patent.
15. Cost of purchasing a patent from an inventor.
16. Legal costs incurred in securing a patent.
17. Unrecovered costs of a successful legal suit to protect the patent.
18. Cost of conceptual formulation of possible product alternatives.
19. Cost of purchasing a copyright.
20. Research and development costs.
21. Long-term receivables.
22. Cost of developing a trademark.
23. Cost of purchasing a trademark.
Instructions:
(a) Indicate which items on the list above would generally be reported as intangible assets in the balance sheet.
(b) Indicate how, if at all, the items not reportable as intangible assets would be reported in the financial statements.
Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.
Cable television franchises | Film contract rights |
Music copyrights | Customer lists |
Research and development costs | Prepaid expenses |
Goodwill | Covenants not to compete |
Cash | Brand names |
Discount on notes payable | Notes receivable |
Accounts receivable | Investments in affiliated companies |
Property, plant, and equipment | Organization costs |
Internet domain name | Land |
Instructions:
Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.
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