Reference no: EM132893645

Question - AUDIT OF INTANGIBLE ASSETS AND PREPAYMENTS - Jeremiah Corporation has provided the following information on intangible assets as follows:

a. A patent was purchased from Isaiah Company for P5,000,000 on January 1, 20x1. On the acquisition date, the patent was estimated to have a useful life of 10 years. The patent had a net book value of P5,000,000 when Isaiah sold it to Jeremiah.

b. On February 2, 20x2, a franchise was purchased from Daniel Company for P2,160,000. The contract that runs for 20 years provides that 5%of revenue from the franchise must be paid to Daniel. Revenue from the franchise for 20x2 was P8,000,000.

c. Jeremiah incurred the following research and development costs in 20x2:

Materials and equipment P462,000

Personnel 657,000

Indirect costs 329,000

Total P1,448,000

Because of the recent events, Jeremiah, on January 1, 20x2, estimates that the remaining useful life of the patent purchased on January 1, 20x1, is only five (5) years from January 1, 20x2.

1. On December 31, 20x2, the carrying value of the patent should be?

2. The unamortized cost of the franchise at December 31, 20x2 should be?

3. How much should be charged against Jeremiah's income for the year ended December 31, 20x2?