Financial Accounting: An Integrated Statements Approach, 2nd Edition

Data related to the acquisition of intangible assets during the current year ended December 31

are as follows:

a. Governmental and legal costs of $655,200 were incurred on January 4 in obtaining a

patent with an estimated economic life of 12 years.

b. Goodwill arising from acquiring a business was purchased on July 1 for $8,400,000. The

goodwill is estimated to have been impaired during the remainder of the year, and thus

was estimated to have a value of $1,100,000 on December 31.

c. Copyrights with an estimated life of nine years were purchased for $450,000 on October 1.

Instructions

1. Record the acquisition of each intangible asset.


2. Record the December 31 adjusting entries for each intangible asset.


3. What impact will the transactions in (1) and (2) have on the statement of cash flows?

Micron Technology, Inc., is in the semiconductor industry. This industry requires extensive

capital investments in fabrication facilities in order to maintain technological competitiveness.

E. I. De Nemours DuPont & Co.is one of the leading chemical companies in the world. DuPont

requires significant investment in chemical processing facilities. Chemical products have longer

lives than do semiconductor products. The following selected fixed asset information is pro-

vided from recent financial statements (all numbers in millions):

Plant and Equipment Accumulated Depreciation

Initial Cost Depreciation Expense

Micron Technology $ 8,998 $ 4,836 $1,158

DuPont 22,661 14,257 1,355

a. Determine the book value of the plant and equipment for each company.

b. Estimate the total useful life of the plant and equipment, assuming straight-line deprecia-

tion and no residual value.

c. Estimate the percent of accumulated depreciation to the total initial cost of property,

plant, and equipment for each company. Round to one decimal place.

d. Interpret the differences between Micron and DuPont from your calculations in (b)

and (c).

The financial performance of the airline industry is sensitive to aircraft utilization and cost con-

trol. The industry uses a number of common measures to evaluate financial performance. Three

of these are as follows:

Passenger Load Factor = RPM/ASM

Operating Revenue per Available Seat Mile = Operating Revenue/ASM

Operating Cost per Available Seat Mile = Operating Cost/ASM

Available seat mile (ASM) is the total number of seats availablefor transporting passengers mul-

tiplied by the total number of miles flown during a reporting period. Revenue passenger mile

(RPM) is the total number of seats purchasedby passengers multiplied by the total number of

miles flown during a reporting period.

434 Chapter 9 Fixed Assets and Intangible Assets

Alternate Problem

9-6B

Intangible assets

Goal 6

Case 9-1

Comparing book value and

depreciation expense for two

companies

Case 9-2

Financial and operational

analyses in the airline industry

FINANCIAL ANALYSIS AND REPORTING CASES