Bountiful Industries Ltd. had one patent recorded on its books as at January 1,
ID: 2460549 • Letter: B
Question
Bountiful Industries Ltd. had one patent recorded on its books as at January 1, 2014. This patent had a book value of $365,100 and a remaining useful life of 7 years. During 2014, Bountiful incurred research costs of $141,900 and brought a patent infringement suit against a competitor. On December 1, 2014, Bountiful received the good news that its patent was valid and that its competitor could not use the process Bountiful had patented. The company spent $107,600 to defend this patent. At what amount should the patent be reported on the December 31, 2014 statement of financial position, assuming monthly straight-line amortization of patents
Explanation / Answer
Carrying Amount
Life in Months
Amortization Per Month
Months Amortization
Patent (1/1/14)
$365,100
84
$4,346.43
12
Legal costs (12/1/14)
107,600
73
$1,473.97
1
$472,700
Carrying amount...............................................................................
$472,700
Less: Amortization of patent (12 X $4,346.43)....................................
(52,157.16)
Legal costs amortization (1 X $1,473.97)................................
(1,473.97)
Carrying amount 12/31/14................................................................
$419,068.87
Carrying Amount
Life in Months
Amortization Per Month
Months Amortization
Patent (1/1/14)
$365,100
84
$4,346.43
12
Legal costs (12/1/14)
107,600
73
$1,473.97
1
$472,700
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