Question

Option #2: Accounting for Intangible Assets and Natural Resources

Part 1

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 ten years. Prepare the journal entry to amortize the copyright at the end of the first year.

Additional requirements

Your responses to the questions (a) and (b) above as well as your analysis should be at least one page and must include the title and reference pages. Your paper must be formatted according to the CSU-Global Guide to Writing and APA (Links to an external site.)Links to an external site.. Review the grading rubric to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.

Part 2

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

ABC, Inc. Journal Entries Date Account Name Debit Credit 1-Jun 0 44Jan d) 9 0

Answer 1

1. Part1:1
2. Preparation of the journal entry to amortize the patent at the end of the first year of  ABC Inc

Date	Particulars	Debit	Credit
1st June	Patent a/c Dr                 To   Bank a/c ( Being Purchase of Patents by ABC on 1st of June	$75000	$75000
31st March	Patent Amortization Expenses- Patent a/c Dr To Patent a/c ( Being the asset was purchased on 1st of June it was used 7 months only)	$4375	$4375

Working:

Patent Purchased for $ 75000

Life is 10 years

Current year utilized or deemed to be utilized was seven months i.e from June to December

Patents / Life *7/12

$75000/10 Years *7/12 =$4375

Preparation of  the journal entry to amortize the copyright at the end of the first year

Date	Particulars	Debit	Credit
4th January	Music distributor's collection of lyrics and songs a/c      Dr                 To   Bank a/c ( Being Purchase of Music distributor's collection of lyrics and songs by ABC on 4th of January	$425000	$425000
31st March	Music distributor's collection of lyrics and songs Amortization Expenses- Copy rights a/c Dr To Music distributor's collection of lyrics and songs a/ a/c ( Being the asset was purchased on 4th of January it was used 12 months )	$42500	$42500

Working:

Music distributor's collection of lyrics and songs Purchased for $ 425000

Life is 10 years

Current year utilized or deemed to be utilized was 12 months i.e from January to December

Patents / Life

$425000/10 Years =$42500

PARA 2:-

Usage allocation terminology for the item.

A—Amortization                P—Depletion

D—Depreciation                N—None of these

__A__     1. Goodwill                                                                         _P___    7. Timberlands

__A__     2. Land                                                                ___N_    8. Franchises (indefinite life)

__D__     3. Buildings                                                                        _A___    9. Licenses (limited life)

___A_     4. Patents                                                                           __D__   10. Land Improvements

_A___     5. Copyrights                                                                     _P___   11. Oil Deposits

___N_     6. Research and development costs                       _D___   12. Equipment