Reference no: EM133161581
Question - In connection with your audit of the JOY Corporation's financial statements for the year 2021, you noted the following items relative to the company's intangible assets.
A patent was purchased from LUCKY Company for P8,000,000 on January 2, 2020. Joy estimated that the remaining life of the patent is 5 years. The patent was carried in LUCKY 's accounting records at a carrying value of P8,000,000 when LUCKY sold it to Joy.
During 2021, a franchise was purchased from Money Company for P1,920,000. In addition, 10% of the revenue from the franchise must be paid to Money. Revenue from the franchise for 2021 was P10,000,000. JOY estimates the useful life of the franchise to be 10 years and takes full year's amortization in the year of purchase.
JOY incurred research and development costs of P866,000 in 2021. Joy estimates that these costs will be recouped by December 31, 2024.
On January 2, 2021, JOY , because of the recent events in the industry, estimates that the remaining life of the patent purchased on January 2, 2020, is only 5 years from January 2, 2021.
Required - Based on the above and the result of your audit, determine the following:
1. Amortization patent for 2021.
2. Carrying amount of patent as of December 31, 2021.
3. Carrying amount of intangible assets as of December 31, 2021.
4. Total amount that should be charged against income in 2021.
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