Laboratories holds a valuable patent (No. 1122098) on a device that prevents certain types of air pollution. Kaboom does not manufacture or sell the products and processes it develops; it conducts research and develops products, which it patents, and then assigns the patents to manufacturers on a royalty basis. The history of Patent No. 1122098 is as follows: Date Activity Cost 20x1-20x2 Research conducted to develop device P1,259,100 Jan. 20x3 Design and construction of a prototype 262,800 Mar. 20x3 Testing of models 126,000 Jan. 20x4 Legal and other fees to process patent application; patent granted June 20x4 186,150 Nov. 20x5 Engineering activity necessary to advance the design of the device to the manufacturing stage 244,500 April 20x7 Research aimed at modifying the design of the patented device 129,000 May 20x8 Legal fees paid in a successful patent infringement suit against a competitor 102,000 Kaboom assumed a useful life of 17 years when it received the initial device patent. On January 1, 20x9, it revised its useful life estimate downward to five (5) 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. Kaboom’s reporting date is December 31, 2x11. Compute the carrying value of Patent No. 1122098 on each of the following dates: 1. December 31, 20x4 ____________ 2. December 31, 20x8 ____________ 3. December 31, 2x11 ____________

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Laboratories holds a valuable patent (No. 1122098) on a device that prevents certain types of air
pollution. Kaboom does not manufacture or sell the products and processes it develops; it conducts
research and develops products, which it patents, and then assigns the patents to manufacturers on a
royalty basis. The history of Patent No. 1122098 is as follows:
Date Activity Cost
20x1-20x2 Research conducted to develop device P1,259,100
Jan. 20x3 Design and construction of a prototype 262,800
Mar. 20x3 Testing of models 126,000
Jan. 20x4 Legal and other fees to process patent application; patent granted June
20x4
186,150
Nov. 20x5 Engineering activity necessary to advance the design of the device to the
manufacturing stage
244,500
April 20x7 Research aimed at modifying the design of the patented device 129,000
May 20x8 Legal fees paid in a successful patent infringement suit against a
competitor
102,000

Kaboom assumed a useful life of 17 years when it received the initial device patent. On January 1, 20x9, it revised its useful life estimate downward to five (5) 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. Kaboom’s reporting date is December 31, 2x11.
Compute the carrying value of Patent No. 1122098 on each of the following dates:
1. December 31, 20x4 ____________
2. December 31, 20x8 ____________
3. December 31, 2x11 ____________

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Intangible assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education