assets at the end of the year a. A patent purchased this year from Miller Co. on
ID: 2512672 • Letter: A
Question
assets at the end of the year a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $6,000. When purchased, the patent had an estimated life of 12 years. b. A trademark was registered with the federal government for $4,000. Management estimated that the trademark could be worth as much as $120,000 because it has an indefinite life. c. Computer licensing rights were purchased this year on January 1 for 42,000. The rights are expected to have a six-year useful life to the wary 1. Compute the acquisition cost of each intangible asset. Acquisitlon Cost Patent Trademark Licensing Rights December 31. (Do not round intermediate calculations.) Expenses Patent Trademark Licensing RightsExplanation / Answer
1) a) The acquisition cost of each intangible asset is shown as follows:-
The acquisition cost of Patent will be equal to cash paid for purchase of patent (i.e. $6,000).
The acquisition cost of trademark will be equal to the amount at which trademark is registered with the federal government (i.e. $4,000).
The acquisition cost of licensing rights is equal to putrchase cost of $42,000.
b) Amortization Expense for Patent = Acquisition Cost/Useful Life
= $6,000/12 yrs = $500
The trademarks will not be amortized because it has an indefinite life
Amortization Expense for Licensing Rights = Acquisition Cost/Useful Life
= $42,000/6 yrs = $7,000
Total Amortization expense for current year = $500+$7,000 = $7,500
c) BLUESTONE COMPANY
Income Statement (Partial)
For the year ending December 31
BLUESTONE COMPANY
Income Statement (Partial)
At December 31
2) a) The total cost of machine will include purchase cost, installation costs and renovation costs prior to use but it will not include repairs cost after production began.
Cost of Machine A = $9,300+$950+$750 = $11,000
Cost of Machine B = $38,500+$2,400+$2,000 = $42,900
Cost of Machine C = $22,300+$1,500+$2,500 = $26,300
b) Depreciation Expense for Machine A = (00Cost - Residual Value)/Useful life
= ($11,000 - $1,300)/5 yrs = $1,940
Deprecition Expense for Machine B per hour = (Cost - Residual Value)/Machine hours capacity
= ($42,900-$900)/20,000 = $2.10 per machine hour
Depereciation Exp. for Machine B for current year = 8,000 hrs*$2.10 per machine hour = $16,800
Depreciation rate for Machine C = (1/10 yrs)*2 = 20%
Depreciation Expense for Machine C = Cost*Double Declining Rate
= $26,300*20% = $5,260
Journal Entries (Amounts in $)
Asset Acquisition Cost Patent $6,000 ,Trademarks $4,000 Licensing Rights $42,000Related Questions
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