Ownership Percentage is between 20% and 50% “Affiliate”. The correct answer is C.

Fair Value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The correct answer is B. 

The cost of the purchased patent is capitalized in Patents account as an intangible asset. This cost is amortized over the years of the patent’s expected useful life. Intangible assets are generally amortized by straight-line method. The cost of the intangible asset is distributed to its useful life equally. In the first example, the useful life of the patent is 10 years.

So the amortization rate will be;  Amortization Rate=1/ Patent’ s Useful Life= 1/ 5

Amortization Expense = Capitalized Cost x Amortization Rate 

The correct answer is A.

All intangible assets are subject to an annual impairment test to determine if the assets
justify their value on the balance sheet. The correct answer is C.

Jan. 1, 2019

• Debit: Franchises & Licenses - 2,000,000
• Credit: Cash - 2,000,000

Dec. 31, 2019

• Debit: Amortization Expense - 200,000
• Credit: Franchises & Licenses - 200,000

The correct answer is A.

The correct answer is C. The effective interest rate is the interest rate that makes the present value of all future cash receipts equal to the purchase price of security. 

Cost is the cash or cash equivalent price of obtaining the asset plus all necessary taxes,
purchase commissions and all other amounts paid to ready the asset for its intended use. The correct answer is E.

A contingent liability is a potential liability because it depends on a future event. If a possible obligation arises from past events but its existence can only be confirmed depending on the occurrence of one or more future events, the obligation under question is a contingent liability. Alternatively, if a present obligation exists but it is not probable that an outflow of economic benefits will be required or even if it is probable, the amount to settle the obligation cannot be measured reliably, the obligation is disclosed as contingent liability. The correct answer is A

[23.000X (2/4)]=11.500

(23.000-11.500)x(2/4)=5.750

11.500+5.750=17.250

Intangible assets are usually reported in the balance sheet in a separate section following Property, Plant and Equipment assets. The balance of each class of intangible assets should be disclosed on the balance sheet at their book value (cost less accumulated depreciation) either in the face of the statement or the notes. Intangibles do not usually use a contra asset account like the contra asset account Accumulated Depreciation used for plant assets. Instead, companies record amortization of intangibles as a direct decrease (credit) to the asset account.

 A license is granted by a governmental body permits a company to use public property in performing its services.

Whenever a good or service is delivered, Value Added Tax (VAT) occurs. VAT is a kind of sales tax. The tax amount is calculated from the revenue (not income as in income tax) by using VAT rates on the delivered product or service. In a sales transaction, the seller receives an amount including both the sales price and VAT. VAT is not included in revenue because the seller collects the value added tax from customers on behalf of the government. On the other hand, the seller also pays VAT to the suppliers while purchasing goods. When the goods and services are delivered, the amount of tax is recorded as VAT received, and in cases of purchases, it is VAT paid account that the amount is recorded in. At the end of each fiscal year, these two accounts on VAT are considered. If VAT received exceeds the VAT paid, this means the seller company has collected more than what it has already paid to government as VAT. Then at year-end, a liability account should be recorded: VAT Payable. Company has to pay this amount to tax office. In opposite case, where VAT paid is more than VAT received, this means that the company has paid more tax. Then, it collected from customers on behalf of government. The excess amount is recorded in an asset account; VAT Deductible. This amount represents a tax receivable from government and is carried forward to the next year in order to be deducted from VAT tax liability.

Available for sale securities are measured with their fair values. Any change in value is reflected in balance sheets with the help of unrealized holding gain or loss accounts. The correct answer is B.

Fair Value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The correct answer is A.

Liabilities have three main characteristics: • They occur because of a past transaction or event. • They create a present obligation for future payment of cash or services. • They are an unavoidable obligation. The correct answer is D.

Depletion per Unit=(Cost- Residual Value) /  Total Estimated Units Available

Depletion Expense=Depletion per Unit x Yearly Extracted Quantity

1,000,000 / 25,000,000  = 0.04 per unit

0.04 x 1,200,000 =48,000 TL

If the price paid for security is equal to the face value, then the security is told to be sold at par. The correct answer is C.

Straight-line depreciation method allocates the depreciable cost of the asset equally to its useful life and is calculated as follows:

Depreciable Cost = Cost of the asset – Residual value

Straight − linedepreciation = DepreciableCost x 1 / Useful life

Company A makes some expenditures for the machine. Purchase price is included in the cost of machinery. Company B makes an expenditure for 25,000 TL for the machine in order to increase the production capacity of the machine. As you remember, if the expenditure increases the capacity or productivity of the asset and/or extends the useful life then this expenditure will be added to the cost of the asset. Therefore, Machinery and Equipment account is debited in this transaction. Company C pays 5,000 TL for the annual maintenance of the machine. In this transaction, the expenditure does neither extend the useful life of the machine nor increases the capacity or productivity. So, these kinds of expenditures will not be added to the cost of the machine. They will be recorded as period expense. To shorten the distance between suppliers, Company D decides to move the factory to Organized Industrial Zone and pays 150,000 TL for disassembling and reassembling of the machines and 100.000 TL. for the transportation. Even though the expenditures are made for the assets to bring them to their intended uses, they will be recorded as period expenses; because this criterion is applied just for the initial recognition of the assets. When the assets are ready to use, only the expenditure that will affect their useful lives and capacity will be added to the cost. Otherwise they will be recorded as a period expense.

As can also be understood from the information given the correct answer is B. Company A and Company B can include the expenditures mentioned in the cost of machinery and equipment, but Company C and Company D can record their expenditures as a period expense.

Customers may make advanced payments for the goods or services they will receive in the future. When the company receives an advanced payment, an obligation occurs for delivering the goods or rendering the service for which the customer has made payment. Therefore, company must record a liability in its financial statements and this liability is named unearned revenue. The correct answer is D.