In: Accounting
Part I
1.Assume you are the chief accountant of Exxon Mobil. Describe to the Board of Directors the accounting for natural resources, including their acquisition, and cost allocation (depletion). Use a real- world example to explain your answers.
2.Assume you are the chief accountant of Microsoft Corporation. Describe to the Board of Directors the accounting for intangible assets, including their acquisition and cost allocation (amortization). Use an example in your explanations.
3.On June 1, ABC Inc. purchased a patent for $75,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year assuming ABC Inc. follows a calendar year.
4.On January 4, ABC Inc. purchased a music distributor's collection of lyrics and songs for $425,000. The copyrights are expected to last another 10 years. Prepare the journal entry to amortize the copyright at the end of the first year.
Part II
For each item listed below, enter a code letter in the blank space to indicate the usage allocation terminology for the item. Use the following codes for your answer:
A—Amortization P—Depletion
D—Depreciation N—None of these
____ 1. Goodwill ____ 7. Timberlands
____ 2. Land ____ 8. Franchises (indefinite life)
____ 3. Buildings ____ 9. Licenses (limited life)
____ 4. Patents ____ 10. Land Improvements
____ 5. Copyrights ____ 11. Oil Deposits
____ 6. Research and development costs ____ 12. Equipment
3.Patent
Amortization expense - Patent a/c Dr. 4375
To Patent 4375
75000/10 = 7500 x 7/12 = 4375
4.Copyrights
Amortization expense - Copyright a/c Dr. 42500
To Copyright 42500
425000 / 10 = 42500
5.Part II - Tangible assets are depreciated;Intangible assets are amortized ; Natural resources are depleted
1. Goodwill - N
2. Land -N - Land only appreciates
3.Buildings - D
4.Patents - A
5.Copyrights - A
6.Research and development costs - N
7.Timberlands - P
8.Franchises (indefinite life) - N - Instead of amortization, indefinite-life assets are evaluated for impairment yearly.
9. Licenses (limited life) - A
10 .Land Improvements - D
11.Oil Deposits - P
12.Equipment - D