a. Patent. The company purchased a patent at a cash cost of company purchased a
ID: 2550693 • Letter: A
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a. Patent. The company purchased a patent at a cash cost of company purchased a copynight for $32,500 cash. It is estimated that the copyrighted itom will have no value by the end of 10 years obtained a tranchise from Mckenna Company $16,000. to make and distribute a special item. It obtained the franchise on January 1, 2017, at a cash cost of $16,400Explanation / Answer
Answer 1. Amortization = Intangible Assets / Useful Life Asset Calculation Amortization Patent $81,900 / 13 Years 6,300.00 Copyright $32,500 / 10 Years 3,250.00 Franchise $16,400 / 10 Years 1,640.00 License $16,000 / 5 Years 3,200.00 Goodwill N A N A Answer 2. Book Value as on Dec 31, 2018: Asset Purchase Cost Accumulated Amortization Balance - Dec 31, 2018 Patent 81,900.00 12,600.00 69,300.00 Copyright 32,500.00 6,500.00 26,000.00 Franchise 16,400.00 3,280.00 13,120.00 License 16,000.00 9,600.00 6,400.00 Goodwill 60,000.00 - 60,000.00 Total 206,800.00 31,980.00 174,820.00 Answer 3. Book Value of Copyright ($26,000) > Future Cash Flow ($23,000) Thus, Copyright fails the Recoverability Test Therefore, New Carrying Value of Copyright = $22,000 (Fair Value of Copyright) Impairement Loss = $26,000 - $22,000 = $4,000
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