(a)
Introduction:
A patent is a type of protected innovation. A patent gives its proprietor the privilege to bar others from making, utilizing, selling, and bringing in a creation for a restricted timeframe, typically twenty years. The patent rights are conceded in return for an empowering open exposure of the creation.
To choose:
Compute and record amortization expense on the patent for 2019.
(b)
Introduction:
A patent is a type of protected innovation. A patent gives its proprietor the privilege to bar others from making, utilizing, selling, and bringing in a creation for a restricted time frame, typically twenty years. The patent rights are conceded in return for an empowering open exposure of the creation.
To choose:
Prepare
(c)
Introduction:
A patent is a type of protected innovation. A patent gives its proprietor the privilege to bar others from making, utilizing, selling, and bringing in a creation for a restricted time frame, typically twenty years. The patent rights are conceded in return for an empowering open exposure of the creation.
To choose:
Prepare journal entry of awarded amount.
(d)
Introduction:
A patent is a type of protected innovation. A patent gives its proprietor the privilege to bar others from making, utilizing, selling, and bringing in a creation for a restricted timeframe, typically twenty years. The patent rights are conceded in return for an empowering open exposure of the creation.
To choose:
Indicate the entry you would have made had Technocrat lost the suit.
(e)
Introduction:
In the financial statement record all types of expense which have incurred in the last current year. This expense may be create the profit or loss for the company.
To choose:
What are the financial statement effects of capitalizing or expensing the cost of defending the patent?
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Cornerstones of Financial Accounting
- The Randolph Company purchased a patent on June 1, 2016 for $1,188,000 with twelve years remaining on the patent’s legal life. It is estimated, however, that this patent will have a useful economic life of only nine years. Questions: 1. Amortization Expense For 2016 & 2017: 2. Balance Sheet Presentation on 9/30/2019: Note: Generally, no accumulated amortization account is generally used for intangibles, and thus they are presented on a single line at net book value. 3. How much can be received for the patent on 3/31/17? 4. Gain or loss before taxes if patent sold on 8/31/21 for $300,000? Where will this item be reported on the income statement? Dollar amount? Gain or loss? Location on income statement?arrow_forwardVan Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the $18 million cost of the patent on a straight-line basis since it was acquired at the beginning of 2012. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2016 (before adjusting and closing entries). What is the appropriate adjusting entry for patent amortization in 2016 to reflect the revised estimate?arrow_forwardSafehouse Company was granted a patent on a product on January 1, 2011 with a 20-year useful life. To protect the patent, the entity purchased on January 1, 2021 for P4,500,000 a patent on a competing product which was originally issued on January 1, 2016. Because of the unique plant, the entity does not feel the competing patent can be used in producing a product. What amount should be recorded as amortization of the compéting patent for 2021? a. 450,000 b. 225,000 C. 300,000 d. 0.arrow_forward
- In January 2024, a company purchased a patent at a cost of $204,000. Legal and filing fees of $61,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January 2027, the company spent $32,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2027 related to the patent should be: Multiple Choice $204,000. $ 58,500 $217,500.arrow_forwardVan Frank Telecommunications has a patent on a cellular transmission process. The company has amortized thepatent on a straight-line basis since 2014, when it was acquired at a cost of $9 million at the beginning of thatyear. Due to rapid technological advances in the industry, management decided that the patent would benefit thecompany over a total of six years rather than the nine-year life being used to amortize its cost. The decision wasmade at the beginning of 2018.Required:Prepare the year-end journal entry for patent amortization in 2018. No amortization was recorded during the year.arrow_forwardThe Randolph Company purchased a patent on June 1, 2016 for $1,188,000 with twelve years remaining on the patent's legal life. useful economic life of only nine years. It is estimated, however, that this patent will have a Questions: A. Amortization Expense For 2016 & 2017: 2016 2017 B. Balance Sheet Presentation on 9/30/2019: Note: Generally, no accumulated amortization account is generally used for intangibles, and thus they are presented on a single line at net book value. C. How much can be received for the patent on 3/31/17? D. Gain or loss before taxes if patent sold on 8/31/21 for $300,000? Where will this item be reported on the income statement? Dollar Amount Gain or Loss? Location on Income Statementarrow_forward
- Klaus, Inc. has the ff. information regarding their intangible assets. Klaus spent P2,600,000 of experimental and development costs in its laboratory to develop a patent which was granted on January 2, 2018. Legal fees and other costs associated with the registration of the patent totaled P544,000. Klaus estimates that the useful life of the patent will be 8 years. Klaus purchased a trademark from Nikolai Co. for P1,280,000 on July 1, 2015. The trademark was successfully defended for a total cost of P326,400 which were paid on July 1, 2017. Klaus estimates that the useful life of the trademark will be 20 years from the date of acquisition. Klaus signed an agreement on January 1, 2018, to operate as a franchise of Chooks to Go. For an initial franchise fee of P3,000,000. Of this amount, P600,000 was paid when the agreement was signed and the balance is payable in 4 annual installments of P600,000 each, beginning January 1, 2019. The downpayment is nonrefundable and no future services…arrow_forwardSaint John Corporation prepares its financial statements according to IFRS. On June 30, 2016, the company purchased a franchise for $1,200,000. The franchise is expected to have a 10-year useful life with no residual value. Saint John uses the straight-line amortization method for all intangible assets. On December 31, 2016, the end of the company’s fiscal year, Saint John chooses to revalue the franchise. There is an active market for this particular franchise and its fair value on December 31, 2016, is $1,180,000. Required: 1. Calculate amortization for 2016. 2. Prepare the journal entry to record the revaluation of the patent. 3. Calculate amortization for 2017.arrow_forwardIn 1975, Riveria Company had acquired copyrights for $750,000 on several literary works from some obscure 18th century authors. These copyrights were fully amortized by 2015. In early 2015, a new anthropological discovery made these copyrights worth $2,500,000. As a result, Riveria should report which of the following in its financial statements for 2015? a. $2,500,000 as an extraordinary item b. cannot be recognized under U.S. GAAP in the financial statements c. $2,500,000 as a holding gain d. $750,000 as copyrights-based recovery of value limited to historical costarrow_forward
- Doreen Company determined that the amortization rate on Its patents Is unacceptably low due to current advances in technology. The company decided at the beginning of 2020 to decrease the estimated total useful life on all existing patents from 10 years to 8 years. Patents were purchased on January 1, 2015 for P3,000,000. The estimated residual value is zero.Doreen Company decided on January 1, 2020, to change its depreciation method for manufacturing equipment from an accelerated method to the straight-line method. The straight-line method is to be used for new acquisitions as well as for previously acquired equipment As of January 1, 2020, the total historical cost of depreciable assets is P8,000,000 and the accumulated depreciation on those assets is P3,400,000. The expected remaining, useful life of Doreen's depreciable assets as of January 1, 2020 is 10 years and the expected residual value is P200.000.What is the total charge against 2020 income as a result of the accounting…arrow_forwardOn January 1, 2017, Black Widow acquired the following intangible assets: A trademark for P2,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the trademark will be renewed in the future, indefinitely, without a problem. A patent for P4,000,000. Because of market conditions, it is expected that the patent will have economic life for just 5 years, although the remaining legal life is 10 years. On December 31, 2017, the intangible assets are assessed for impairment. Because of the decline in the economy, the trademark is expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends beyond the foreseeable horizon. The cash flows expected to be generated by the patent are P500,000 annually for each of the next 4 years. The appropriate discount rate for all intangible assets is 8%. The present value of ordinary annuity of 1 at 8% for four periods is 3.31. What total amount to be recognized as impairment…arrow_forwardOn January 1, 2015, Schielanie company acquired a building to be held as investment property in a remote location for 7,500,000. After initial recognition, the entity measured the investment property using the cost model because the fair value cannot be measured reliably. On December 31, 2015, management assessed the building’s useful life at 50 years from the date of acquisition and presumed the residual value to be nil because the fair value cannot be determined reliably. At year end, the entity declined an unsolicited offer to purchase the building for 9,750,000. This is a one time offer that is unlikely to be repeated in the foreseeable future. What is the carrying amount of the building on December 31, 2015?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning