Question

In: Accounting

On June 2, 2018, Lokar Corporation purchases a patent for $68,000 from the inventor of a...

On June 2, 2018, Lokar Corporation purchases a patent for $68,000 from the inventor of a new extrusion process. The patent has 12 years remaining on its legal life. Also, Lokar purchases substantially all the assets of the Barrios Corporation for $750,000 on September 8, 2018. The values of the assets listed in the purchase agreement are as follows:

Inventory $250,000
Manufacturing equipment 1,176,000
Patent on compression process 105,000
Goodwill 95,000

Refer to the MACRS Depreciation Table to answer the following question.

Note: In your calculations, round amortization percentages to two decimal places, and dollar amounts to the nearest whole dollar. Assume the equipment has a MACRS recovery period of 7 years and that the full election expense is taken in the year of acquisition.

The maximum 2018 cost-recovery deductions for the tangible and intangible assets purchased is $

Solutions

Expert Solution


Related Solutions

Byron Bright, an inventor, sells the patent rights on his latest invention to Wilson Corporation. Wilson...
Byron Bright, an inventor, sells the patent rights on his latest invention to Wilson Corporation. Wilson intends to manufacture and sell Byron’s invention. Byron will receive $50 per unit Wilson sells plus a lump-sum payment of $500,000. What is the tax treatment of each type of payment for Byron? If Wilson Corporation is limited to producing and selling Byron’s invention in the western section of the United States, what is the tax treatment of each type of payment?
PATENT LAW: True or False. A patent pending status does not give an inventor the status...
PATENT LAW: True or False. A patent pending status does not give an inventor the status to sue a copycat for infringement. Explain.
19. On June 30, 2016, Mobley Corporation acquired a patent for $4.10 million. The patent was...
19. On June 30, 2016, Mobley Corporation acquired a patent for $4.10 million. The patent was estimated to have an eight-year life and no residual value. Mobley uses the straight-line method of amortization for intangible assets. At the beginning of January 2018, Mobley successfully defended its patent against infringement. Litigation costs totaled $660,000. Required: 1. Calculate patent amortization for 2016 and 2017. 2. Prepare the journal entry to record the 2018 litigation costs. 3. Calculate amortization for 2018. 4-a. Prepare...
A patent gives the inventor exclusive rights to manufacture and sell a product for a certain...
A patent gives the inventor exclusive rights to manufacture and sell a product for a certain length of time (usually 17 years). Assume ABCGolf has invented a golf swing analyzer that makes it simple for a golfer to produce a solid golf swing and hit the golf ball long and straight. Further assume that ABCGolf’s patent gives it a monopoly on this golf swing improvement device. a. ABCGolf is making an economic profit. Draw a correctly labeled graph that includes...
Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017, for $54,000. The patent has a remaining legal life of 12 years.
Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017, for $54,000.The patent has a remaining legal life of 12 years.Indigo feels the patent will be useful for 10 years.Prepare Indigo's journal entries to record the purchase of the patent and 2017 amortization.(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and...
In January 2018, Vega Corporation purchased a patent at a cost of $212,000. Legal and filing...
In January 2018, Vega Corporation purchased a patent at a cost of $212,000. Legal and filing fees of $69,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January, 2021, Vega spent $23,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2021 related to...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year. Cash receipts: Sale of common stock $ 67,500 Collections from customers 320,000 Borrowed from local bank on April 1, note signed requiring principal and interest...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year. Cash receipts: Sale of common stock $ 70,000 Collections from customers 325,000 Borrowed from local bank on April 1, note signed requiring principal and interest...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells...
McGuire Corporation began operations in 2018. The company purchases computer equipment from manufacturers and then sells to retail stores. During 2018, the bookkeeper used a check register to record all cash receipts and cash disbursements. No other journals were used. The following is a recap of the cash receipts and disbursements made during the year. Cash receipts: Sale of common stock $ 55,000 Collections from customers 295,000 Borrowed from local bank on April 1, note signed requiring principal and interest...
On July 15, 2018, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $840,000...
On July 15, 2018, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $840,000 and $370,000, respectively. The book value of the patent and equipment on the date of sale were $165,000 and $454,000 (cost of $649,000 less accumulated depreciation of $195,000), respectively. Prepare the journal entries to record the sales of the patent and equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT