Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows. Date Activity Cost 2008–2009 Research conducted to develop precipitator $372,000 Jan. 2010 Design and construction of a prototype 86,200 March 2010 Testing of models 35,000 Jan. 2011 Fees paid engineers and lawyers to prepare patent application; patent granted June 30, 2011 76,500 Nov. 2012 Engineering activity necessary to advance the design of the precipitator to the manufacturing stage 93,500 Dec. 2013 Legal fees paid to successfully defend precipitator patent 35,000 April 2014 Research aimed at modifying the design of the patented precipitator 36,000 July 2018 Legal fees paid in unsuccessful patent infringement suit against a competitor 31,000 Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2016, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31. Compute the carrying value of patent No. 758-6002-1A on each of the following dates: (a) December 31, 2011 $ (b) December 31, 2015 $ (c) December 31, 2018 $
Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.
Date
|
Activity
|
Cost
|
||
2008–2009 | Research conducted to develop precipitator | $372,000 | ||
Jan. 2010 | Design and construction of a prototype | 86,200 | ||
March 2010 | Testing of models | 35,000 | ||
Jan. 2011 | Fees paid engineers and lawyers to prepare patent application; | |||
patent granted June 30, 2011 | 76,500 | |||
Nov. 2012 | Engineering activity necessary to advance the design of the | |||
precipitator to the manufacturing stage | 93,500 | |||
Dec. 2013 | Legal fees paid to successfully defend precipitator patent | 35,000 | ||
April 2014 | Research aimed at modifying the design of the patented precipitator | 36,000 | ||
July 2018 | Legal fees paid in unsuccessful patent infringement suit against a | |||
competitor | 31,000 |
Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2016, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.
Compute the carrying value of patent No. 758-6002-1A on each of the following dates:
(a) | December 31, 2011 |
$
|
||
(b) | December 31, 2015 |
$
|
||
(c) | December 31, 2018 |
$
|
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Patents
Patents are intangible assets that are issued by the government to the firm to protect their inventions. These also allow firms to control the manufacture and selling of the product. These rights are granted for a finite period of 20 years.
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