### Intangible Assets and Amortization Calculation#### Scenario:1. **Patent**: Purchased this year from Miller Co. on January 1 for a cash cost of $1,600. It has an estimated life of 8 years.2. **Trademark**: Registered with the federal government for $10,000. Management estimates the trademark could be worth as much as $240,000 due to its indefinite life.3. **Computer Licensing Rights**: Purchased this year on January 1 for $42,000, with an expected useful life of 6 years.#### Required Calculations:1. Compute the acquisition cost of each intangible asset.2. Compute the amortization of each intangible for the current year ended December 31.3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year.---### Required Calculations:#### 1. Acquisition Cost- **Patent**: $1,600- **Trademark**: $10,000- **Computer Licensing Rights**: $42,000#### 2. Amortization Calculation for the Current Year Ended December 31The table provided for amortization expenses calculates the annual amortization as follows:| Asset Type | Acquisition Cost | Estimated Useful Life | Annual Amortization Expense ||-----------------------|------------------|-----------------------|---------------------------------|| Patent | $1,600 | 8 years | $1,600 ÷ 8 = **$200** || Trademark | $10,000 | Indefinite | **$0** (No amortization) || Computer Licensing Rights | $42,000 | 6 years | $42,000 ÷ 6 = **$7,000** |#### 3. Balance Sheet and Income Statement Reporting- **Balance Sheet**: - **Intangible Assets**: - Patent: $1,400 ($1,600 - $200) - Trademark: $10,000 - Computer Licensing Rights: $35,000 ($42,000 - $7,000)- **Income Statement**: - **Amortization Expenses**: - Patent Amortization Expense: $200 - Computer Licensing Rights Amortization Expense: $7,000 ---### Visual Explanation:The provided section includes a table showing the

Intangible assets should be amortized equally over its useful life. However if an intangible asset…

a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $1,600. When purchased, the patent had an estimated life of 8 years. b. A trademark was registered with the federal government for $10,000. Management estimated that the trademark could be worth as much as $240,000 because it has an indefinite life. c. Computer licensing rights were purchased this year on January 1 for $42,000. The rights are expected to have a six-year useful life to the company. Required: 1. Compute the acquisition cost of each intangible asset. 2. Compute the amortization of each intangible for the current year ended December 31. 3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the amortization of each intangible for the current year ended December 31. (Do not round intermediate calculations.) Amortization Expenses 200 O Patent 2$ Trademark 833 Licensing Rights 2$ 7,000

a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $1,600. When purchased, the patent had an estimated life of 8 years. b. A trademark was registered with the federal government for $10,000. Management estimated that the trademark could be worth as much as $240,000 because it has an indefinite life. c. Computer licensing rights were purchased this year on January 1 for $42,000. The rights are expected to have a six-year useful life to the company. Required: 1. Compute the acquisition cost of each intangible asset. 2. Compute the amortization of each intangible for the current year ended December 31. 3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the amortization of each intangible for the current year ended December 31. (Do not round intermediate calculations.) Amortization Expenses 200 O Patent 2$ Trademark 833 Licensing Rights 2$ 7,000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 76APSA

See similar textbooks

Similar questions

Amortization Entries Kleen Company acquired patent rights on January 10 of Year 1 for $2,800,000. The patent has a useful life equal to its legal life of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $38,000. a. Determine the patent amortization expense for Year 4 ended December 31. 134,000 x Feedback V Check My Work For intangible assets with finite lives, a company uses the straight-line method to calculate amortization. If a company successfully defends a patent it becomes part of the cost of the patent. If the company loses a lawsuit regarding a patent infringement, then the patent is written off. b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. If an amount box does not require an entry, leave it blank. Amortization Expense-Patents 2,125 X Patents 2,125 X
QUESTION 8 Co. A purchased a patent on 31 December 20X1 for $450,000. Co. A expects to use the patent for 5 years, after which it will be valueless. According to IAS 38 Intangible assets, compute the annual amortisation charge. What is the journal entry required to record the amortisation in the accounts for the year ended 31 December 20X2?
Current Attempt in Progress Cullumber Company incurred research and development costs of $89000 to develop a patent, and legal fees of $29000 to register the patent. The patent has a legal life of 20 years and a useful life of 10 years. What amount should Cullumber record as Patent Amortization Expense in the first year if the straight-line method is used? O $5900 O $2900 O $11800 O $0
QUESTION 9 A company buys a patent for $100,000 on 31 December 20X1. It expects to use the patent for the next 10 years, after which it will be valueless. According to IAS 38 Intangible assets, compute the annual amortisation charge. What is the journal entry required to record the amortisation in the accounts for the year ended 31 December 20X2
Determining Carrying Value and Amortization of Intangible Assets Review the following information pertaining to Denzel Company. A patent was purchased on January 2, 2018, for $149,500 when the remaining legal life was 16 years. On January 2, 2020, Denzel determined that the remaining useful life of the patent was only eight years from the date of its acquisition. On January 1, 2020, Denzel Company purchased a second patent for $184,000 cash. At January 1, 2020, 6 years of the patent's legal life of 20 years had already expired. On June 30, 2020, Denzel Company paid a firm $18,400 for a new trademark. Denzel considers the life of the trademark to be indefinite. On November 1, 2020, Denzel Company acquired all noncash assets and assumed all liabilities of Lee Company at a cash purchase price of $276,000. Denzel determined that the fair value of the identfiable net assets acquired in the transaction is $269,100. Note: When answering the following questions, do not round until your…
The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.
The following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.
(Appendix 11.1) Auburn Company purchased an asset on January 1, Year 1, for 150,000. The asset has a MACRS life of 7 years. The residual value of the asset is 35,000. Calculate the depreciation expense for Year 1 and Year 2 using MACRS.
Exercise 10-26 (Algo) Research and development [LO10-8] In 2021, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures: Basic research to develop the technology Engineering design work Development of a prototype device Acquisition of equipment Testing and modification of the prototype Legal and other fees for patent application on the new communication system Legal fees for successful defense of the new patent $2,700,000 820,000 440,000 74,000 340,000 54,000 34,000 $4,462,000 Total The equipment will be used on this and other research projects. Depreciation on the equipment for 2021 is $24,000. During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be…
6. Bluestone Company had three intangible assets at the end of the current 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 company. polnts еВook Print Required: References 1. Compute the acquisition cost of each intangible asset. 2. Compute the amortization of each intangible for the current year ended December 31. 3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3A Reg 3B Compute the acquisition…
Current Attempt in Progress On January 1, 2023 (the first day of its fiscal year) Swifty Ltd. acquired a patent which gave the company the right to use a production process. The process met the six criteria for capitalization as an intangible asset. Below is a listing of the events relating to the patent over the five fiscal years from 2023 through 2027: 2023: 2024: on January 1, acquired the patent for the production process for a cash payment of $18,600,000, and determined that the process had an indefinite useful life. on December 31, tested the patent for impairment and determined that its fair value was $19,800,000. 2026: on December 31, tested the patent for impairment and determined that its fair value was $17,500,000. 2025: on December 31, tested the patent for impairment and determined that its fair value was $18,000,000. on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful…
CHPT#9_4 Amortization Expense For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A patent with a 15-year remaining legal life was purchased for $756,000. The patent will be commercially exploitable for another six years. A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $88,200 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 15 years and is currently worth $720,000. A franchise granting exclusive distribution rights for a new wind turbine within a three-state area for four years was obtained at a cost of $72,000. Satisfactory sales performance over the four years permits renewal of the franchise for another four years (at an additional cost determined at renewal).