Merca Inc. has provided the auditors with the ff. information:
- A patent was purchased on January 1, 2015 from Seagull Co. for 6,000,000. Estimated useful life is 10 years. The patent had a net book value of P6,000,000 when Merca bought it from Seagull. Because of recent events, Merca decides that a change in estimated useful life of intangible assets is necessary. Therefore on January 1, 2016, the remaining useful life of the patent purchased on January 1, 2015, is only 5 years from January 1, 2016.
-A franchise was purchased on February 1, 2016 for P1,440,000. The contract was for 20 years and terms include 5% revenue from franchise must be paid to the franchisor. Revenue for 2016 was P7,500,000.
-The ff. research and development costs were incurred by Merca in 2016:
Materials and equipment |
426,000 |
Personnel |
|
567,000 |
Indirect costs |
306,000 |
1. On December 31, 2016, the carrying amount of the patent should be: