Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 577 views

    PRTC Signed An Agreement

    Uploaded by

    hershey
    PRTC Corporation acquired a franchise for P680,000 in 2012. They must pay P120,000 annually until 2016 and pay 5% of annual revenue to the franchisor. Their 2012 revenue was P8,000,000. PRTC also acquired a patent for P1,100,000 through a combination of cash, stock, and a note payable. Finally, they purchased a trademark for P1,200,000 that was determined to have an indefinite useful life, but recent competition has reduced its expected cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    PRTC Signed An Agreement

    Uploaded by

    hershey
    577 views2 pages
    PRTC Corporation acquired a franchise for P680,000 in 2012. They must pay P120,000 annually until 2016 and pay 5% of annual revenue to the franchisor. Their 2012 revenue was P8,000,000. PRTC also acquired a patent for P1,100,000 through a combination of cash, stock, and a note payable. Finally, they purchased a trademark for P1,200,000 that was determined to have an indefinite useful life, but recent competition has reduced its expected cash flows.

    Original Title

    PRTC signed an agreement

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    PRTC Corporation acquired a franchise for P680,000 in 2012. They must pay P120,000 annually until 2016 and pay 5% of annual revenue to the franchisor. Their 2012 revenue was P8,000,000. PRTC also acquired a patent for P1,100,000 through a combination of cash, stock, and a note payable. Finally, they purchased a trademark for P1,200,000 that was determined to have an indefinite useful life, but recent competition has reduced its expected cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    577 views2 pages

    PRTC Signed An Agreement

    Uploaded by

    hershey
    PRTC Corporation acquired a franchise for P680,000 in 2012. They must pay P120,000 annually until 2016 and pay 5% of annual revenue to the franchisor. Their 2012 revenue was P8,000,000. PRTC also acquired a patent for P1,100,000 through a combination of cash, stock, and a note payable. Finally, they purchased a trademark for P1,200,000 that was determined to have an indefinite useful life, but recent competition has reduced its expected cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    PROBLEM NO.

    3 You noted the following items relative to the company’s Intangible assets in connection
    with your audit of the PRTC Corporation’s financial statements for the year 2012.

    Franchise

    On January 1, 2012, PRTC signed an agreement to operate as franchisee of Clear Copy Service, Inc. for an
    initial franchise of P680,000. Of this amount, P200,000 was paid when the agreement was signed and
    the balance was payable in four annual payments of P120,000 each, beginning January 1, 2013. The
    agreement provides that the down payment is not refundable and no future services are required of the
    franchisor. The implicit rate for loan of this type is 14%. The agreement also provides the 5% of the
    revenue from the franchise must be paid to the franchisor annually. PRTC’s revenue from the franchise
    for 2012 was P8,000,000. PRTC estimates the useful life of the franchise to be ten years.

    Patent

    On July 1, 2012, PRTC purchased a patent from the inventor, who asked P1,100,000 for it. PRTC paid for
    the patent as follows: cash, P400,000; issuance of 10,000 shares of its own ordinary shares, par P10
    (market value, P20 per share); and a note payable due at the end of three years, face amount, P500,000,
    noninterest-bearing. The current interest rate for this type of financing is 12 percent. PRTC estimates the
    useful life of the patent to be ten years.

    Trademark

    PRTC purchased for P1,200,000 a trademark for a very successful soft drink it markets under the name
    POWER!. The trademark was determined to have an indefinite life. A competitor recently introduced a
    product that is in direct competition with the POWER! product, thus suggesting the need for an
    impairment test. Data gathered by the entity suggests that the useful life of the trademark is still
    indefinite, but the cash flows expected to be generated by the trademark have been reduced either to
    P40,000 per year (with a probability of 70%) or to P80,000 per year (with 30% probability). The
    appropriate risk-free interest rate is 5%. The appropriate riskadjusted interest rate is 10%.

    QUESTIONS: Based on the above and the result of your audit, determine the following: (Round off
    present value factors to 4 decimal places)

    11. Total expenses related to franchise in 2012

    a. P503,914 c. P448,950 b. P535,200 d. P454,964 12.

    Carrying amount of franchise as of December 31, 2012

    a. P549,644 c. P538,733 b. P494,680 d. P612,000

    13. Carrying amount of patent as of December 31, 2012

    a. P1,045,000 c. P860,310 b. P 955,900 d. P908,105

    14. Total expenses related to the intangible assets in 2012

    a. P662,759 c. P733,063 b. P711,709 d. P802,212 15.

    You might also like