Nieland Industries had one patent recorded on its books as of January 1, 2014. T

Question

Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $371,520 and a remaining useful life of 9 years. During 2014, Nieland incurred research and development costs of $102,890 and brought a patent infringement suit against a competitor. On December 1, 2014, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $131,920 to defend this patent. At what amount should patent(s) be reported on the December 31, 2014, balance sheet, assuming monthly amortization of patents?

Explanation / Answer

Opening book value of Patent= $ 371,520

Less:Amortisation cost            =$ (41,280)

Vlosing book Value of patenet =$ 330,240

Note:Research and development cost and Suit files for infringement will not be taken into capitalisation of Patent Cost as per IAS 38. Thus It will be expensed out when they are incurred.

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