b) ABC industry has the following patents on its December 31, 2017, Balance sheet: Patent Item Initial Cost(BDT)Date Acquired 1/3/14 of Useful life 17 years 10 years 4 years Patent A Patent B Patent C 30,000 15,000 14,400 1/7/15 1/9/16 The following events occurred during the year ended December 31, 2018: 1) Research and Development costs of Tk. 2,45,700 were incurred during the year. 2) Patent D was purchased on July 1, for Tk. 36,480. This patent has a useful life of 9.5 years. 3) As a result of reduced demands of certain products protected by patent B, a possible impairment of patent B,s value may have occurred at December 31,2018. The controller of ABC Industry estimates the expected future cash flows from patent B will be as follows: Year 2019 2020 2021 Expected Future cash flows(BDT) | 2,000 2,000 2,000 The proper discount rate to be used for these cash flows is 8% (Assume the cash flows occur at the end of the year) Requirements: Compute the total carrying amount of ABC'spatents on its December 31, 2017, balance sheet. Compute the total carrying amount of ABC'spatents on its December 31, 2018, balance sheet.
b) ABC industry has the following patents on its December 31, 2017, Balance sheet: Patent Item Initial Cost(BDT)Date Acquired 1/3/14 of Useful life 17 years 10 years 4 years Patent A Patent B Patent C 30,000 15,000 14,400 1/7/15 1/9/16 The following events occurred during the year ended December 31, 2018: 1) Research and Development costs of Tk. 2,45,700 were incurred during the year. 2) Patent D was purchased on July 1, for Tk. 36,480. This patent has a useful life of 9.5 years. 3) As a result of reduced demands of certain products protected by patent B, a possible impairment of patent B,s value may have occurred at December 31,2018. The controller of ABC Industry estimates the expected future cash flows from patent B will be as follows: Year 2019 2020 2021 Expected Future cash flows(BDT) | 2,000 2,000 2,000 The proper discount rate to be used for these cash flows is 8% (Assume the cash flows occur at the end of the year) Requirements: Compute the total carrying amount of ABC'spatents on its December 31, 2017, balance sheet. Compute the total carrying amount of ABC'spatents on its December 31, 2018, balance sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![b) ABC industry has the following patents on its December 31, 2017, Balance sheet:
Patent Item Initial Cost(BDT)Date
Acquired
1/3/14
of Useful life
17 years
10 years
4 years
Patent A
Patent B
Patent C
30,000
15,000
14,400
1/7/15
1/9/16
The following events occurred during the year ended December 31, 2018:
1) Research and Development costs of Tk. 2,45,700 were incurred during the year.
2) Patent D was purchased on July 1, for Tk. 36,480. This patent has a useful life of 9.5
years.
3) As a result of reduced demands of certain products protected by patent B, a possible
impairment of patent B,s value may have occurred at December 31,2018. The controller
of ABC Industry estimates the expected future cash flows from patent B will be as
follows:
Year
2019
2020
2021
Expected Future cash flows(BDT)
| 2,000
2,000
2,000
The proper discount rate to be used for these cash flows is 8% (Assume the cash flows occur at
the end of the year)
Requirements:
Compute the total carrying amount of ABC'spatents on its December 31, 2017,
balance sheet.
Compute the total carrying amount of ABC'spatents on its December 31, 2018,
balance sheet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0102f895-aa30-4a4a-bf2f-ff8170e98ca7%2Ffc8329bf-e879-4a83-a808-6a3d52042826%2Fpg0le7p_processed.png&w=3840&q=75)
Transcribed Image Text:b) ABC industry has the following patents on its December 31, 2017, Balance sheet:
Patent Item Initial Cost(BDT)Date
Acquired
1/3/14
of Useful life
17 years
10 years
4 years
Patent A
Patent B
Patent C
30,000
15,000
14,400
1/7/15
1/9/16
The following events occurred during the year ended December 31, 2018:
1) Research and Development costs of Tk. 2,45,700 were incurred during the year.
2) Patent D was purchased on July 1, for Tk. 36,480. This patent has a useful life of 9.5
years.
3) As a result of reduced demands of certain products protected by patent B, a possible
impairment of patent B,s value may have occurred at December 31,2018. The controller
of ABC Industry estimates the expected future cash flows from patent B will be as
follows:
Year
2019
2020
2021
Expected Future cash flows(BDT)
| 2,000
2,000
2,000
The proper discount rate to be used for these cash flows is 8% (Assume the cash flows occur at
the end of the year)
Requirements:
Compute the total carrying amount of ABC'spatents on its December 31, 2017,
balance sheet.
Compute the total carrying amount of ABC'spatents on its December 31, 2018,
balance sheet.
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