2. Mueller spent $15,000 for the salary of its in-house designers to develop a t

Question

2. Mueller spent $15,000 for the salary of its in-house designers to develop a trademark Mueller also spent $1,500 on registration fees and $3,500 on legal fees to register the company's trademark on January 1,2017. What is the carrying value of the trademark on January 2, 2017? 3. Mueller purchased a patent from Adams Company for $281,250 on January 1, 2013. Wagner estimates that the patent will have a useful life of 9 years from the date of acquisition Expenditures for successful litigation in defense of the patent totaling $110,000 were paid on July 1, 2016. What is the carrying value of the patent at January 1, 2017?

Explanation / Answer

2)

Carrying Value of trademark as on January 2,2017:

Registration fees = 1500

Add: Legal fees = 3500

Carrying Value of trademark = 5000

All other expenses related to the trademark creation, such as design, advertising, promotions, payroll and others are not permitted to be capitalized; they are expensed in the period when incurred.

3)

Cost of Patent as on January 1,2013 = 281250

Less: Amortisation expense for 3.5 months = (281250/9)*3.5 = 109375

Carrying value of Patent as on July 1, 2016 = 171875

Add: Litigation expenses incurred as on July 1,2016 = 110000

Net Carrying value of Patent as on July 1, 2016 = 171875 + 110000 = 281875

Less: Amortisation expense for 0.5 months = [281875/(9 - 3.5)]*0.5 = 51250*0.5 = 25625

Carrying value of patent as on January 1, 2017 = 256250

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