Reference no: EM133090190

Questions -

Q1. BTS Corporation purchased a patent (with an estimated useful life of ten years) for a total purchase price of P 850,000 on March 31, 2015. Other expenses related to the purchases included legal and consulting fees for a total sum of P 165,000.

On August 31, 2018, the company successful defended the patent for a total cost of P 175,000. On January 1, 2020, BTS Corporation determined that the patent will only be useful for another three years.

Determine the carrying value of the patent on December 31, 2020.

Q2. The net assets of BTS corporation amounted to P 350,000,000, excluding goodwill. On the other hand, the company's average net income for the past years has been P 75,800,000.00.

Assume that the industry's normal rate of return is 17.5%, compute for the company's goodwill through capitalization of excess earnings at 30%.