Exam 9: Intangible Assets, goodwill, mineral Resources, and Government Grants

Growth Corp. ,a publicly accountable entity,purchased a company with the following assets and liabilities for $100,000: Which of the following is not correct about the difference between carrying value and fair value?

Which statement is not correct?

How does IFRS require that government grants for property,plant and equipment (PPE)be recorded?

Which of the following is not a difference between intangible assets and property,plant and equipment (PPE)?

Which of the following is a difference between intangible assets and property,plant and equipment (PPE)?

Lilly Limited is planning to enlarge its factory in an economically challenged area of Canada.The federal,provincial,and municipal governments are all keen to assist the firm in making this investment successful,and hopefully generate permanent and significant economic and social benefits for the region.Collaboratively the three levels of government and the company have made the following commitments: i.Lilly will build a factory that will cost $90 million. ii.The city will donate the land for the factory,which has a fair value of $6,000,000.Upon completing construction,the legal title of the land will be transferred to Lilly. iii.For the next five years,the city will reduce the property and municipal taxes the company has to pay on the new factory by 15%.It is estimated that these taxes would be $2,200,000 per year before the discount. iv.The federal government will provide a forgivable loan of $7,500,000 to assist in the financing of the factory.The loan will be forgiven over five years if the company employs at least 220 workers per year in the new factory. v.For the next five years,the provincial government will provide a training subsidy of $2,500,000 a year for the employment and skill development of local residents. vi.The federal government will give Lilly a $1,200,000 grant immediately for having had a factory in the region for the past 10 years. vii.The federal government will give Lilly $15,000,000 in five years if it maintains an average workforce of 920 workers employed at the new factory.During the first year an average of 235 workers were employed,as the factory was in the start-up stage. Required: a.Prepare journal entries to record each of the seven items described above for the first year.Assume all estimates and expectations for the first year are correct and the factory is built and operational in the first year.Lilly Limited uses the net method to record grants.No depreciation will be recorded in the first year. b.What will be the annual depreciation expense for the factory starting in year two? Lilly Limited uses the net method to record grants.The factory is expected to have useful life of 30 years (excluding the first year in the start-up phase)and no material residual value.The company uses straight-line depreciation. c.By how much was net income increased because of government assistance in the first year? For the second year,assume all continuing conditions to be eligible for the grants are met.How much was net income increased by in the second year? Ignore income taxes.

A professional sports team and related items (including a stadium)were bought by an exceedingly wealthy investor and sports fan.The negotiated price was $225,000,000.Details of what was purchased and the agreed fair values are as follows: The team has been less than successful in its professional sports league and has been recording losses of $1,000,000 to $8,000,000 per year on its audited financial statements for the past five years.It was these losses that prompted the last owner to sell the team and related assets. Required: a.Of the $225 million purchase price,how much of it relates to tangible assets? What percentage of the purchase price relates to tangible assets? b.Describe the nature of the future economic benefits associated with each of the intangible assets acquired.For example,for the cablevision broadcasting contract,this would be the present value of the future payments expected from contracts for the broadcast of games on cablevision channels plus potential renewal contracts thereafter.

Soorya Resources incurred the following costs: How much would be recorded as depreciation expense under the successful efforts method?

Which statement is correct?

Which statement is correct?

A professional sports team and related items (including a stadium)were bought by an exceedingly wealthy investor and sports fan.The negotiated price was $225,000,000.Details of what was purchased and the agreed fair values are as follows: The team has been less than successful in its professional sports league and has been recording losses of $1,000,000 to $8,000,000 per year on its audited financial statements for the past five years.It was these losses that prompted the last owner to sell the team and related assets. Required: a.There are several identifiable intangible assets noted on the list.Group these assets into three classes,being those that are (i)easily measurable and identifiable; (ii)reasonably measurable and identifiable;and (iii)very difficult to measure and identify. For each group,what common quality or feature of these items distinguishes their classification? b.While all the items can be assigned a value,would you capitalize all these amounts? Explain your conclusion.

Patent Corp. ,a publicly accountable entity,incurred the following costs: How much of the costs can be capitalized as intangible assets?

SuperIdeas Corp,a publicly accountable entity,incurred the following costs in its research and development division: At August 1,2018,SuperIdeas determined that the project was technically feasible but not commercially viable.How much,if any,of the costs can be capitalized for fiscal 2018?

Which statement is not correct?

Explain how government grants are accounted for and presented in the financial statements.

Soorya Resources incurred the following costs: How much would be capitalized as "intangible assets" under the successful efforts method?

Which statement is correct?

What is the appropriate treatment for re-payment of government grants under ASPE?

How does IFRS require that government grants for property,plant and equipment (PPE)be recorded?

Growth Corp. ,a publicly accountable entity,purchased a company with the following assets and liabilities for $97,000: Which of the following is not correct?