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e year ended December 31, 2020. $253.000 were incurred during the year. or $43.092. This patent has a useful life of 9/2years. certain products protected by Patent B, a possible impairment

e year ended December 31, 2020. $253.000 were incurred during the year. or $43.092. This patent has a useful life of 9/2years. certain products protected by Patent B, a possible impairment

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Larkspur Industries has the following patents on its December 31. 2019, balance sheet. Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A $45,492 3/1/16 17 years Patent B $17,760 7/1/17 10 years Patent C $25,440 9/1/18 4years The following events occurred during the year ended December 31, 2020. 1 Research and development costs of $253,000 were incurred during the year. 2. Patent Dwas purchased on July 1 for $43,092. This patent has a useful life of 9'/2years. 3. Asa result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B's value may have occurred at December 31, 2020. The controller for Larkspur estimates the expected future cash flows from Patent Bwill be as follows. Vear Expected Future Cash Flows 2021 s2.050 2022 2.0s0 2023 2.0s0 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Compute the total carrying amount of Larkspur' patents on its December 31, 2019, balance sheet. Total carrying amount Compute the total carrying amount of Larkspur' patents on its December 31, 2020, balance sheet. Total carrying amount
Transcribed Image Text:Larkspur Industries has the following patents on its December 31. 2019, balance sheet. Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A $45,492 3/1/16 17 years Patent B $17,760 7/1/17 10 years Patent C $25,440 9/1/18 4years The following events occurred during the year ended December 31, 2020. 1 Research and development costs of $253,000 were incurred during the year. 2. Patent Dwas purchased on July 1 for $43,092. This patent has a useful life of 9'/2years. 3. Asa result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B's value may have occurred at December 31, 2020. The controller for Larkspur estimates the expected future cash flows from Patent Bwill be as follows. Vear Expected Future Cash Flows 2021 s2.050 2022 2.0s0 2023 2.0s0 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Compute the total carrying amount of Larkspur' patents on its December 31, 2019, balance sheet. Total carrying amount Compute the total carrying amount of Larkspur' patents on its December 31, 2020, balance sheet. Total carrying amount
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