Question

Skysong 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 $44,268 3/1/16 17 years Patent B $17,040 7/1/17 10 years Patent C $22,560 9/1/18 4 years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $247,000 were incurred during the year. 2. Patent D was purchased on July 1 for $37,848. This patent has a useful life of 91/2 years. 3. As a 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 Skysong estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2021 $2,200 2022 2,200 2023 2,200 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Click here to view factor tables Correct answer iconYour answer is correct. Compute the total carrying amount of Skysong’ patents on its December 31, 2019, balance sheet. Total carrying amount $enter the Total carrying amount in dollars 62106 eTextbook and Media New

attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect. Compute the total carrying amount of Skysong' patents on its December 31, 2020, balance sheet. Total carrying amount $enter the Total carrying amount in dollars

Answer 1

CARRYING AMOUNT OF PATENTS AS ON 31ST DECEMBER 2019
	ASSET	PATENT A	PATENT B	PATENT C
a)	COST	$   44,268.00	$    17,040.00	$     22,560.00
b)	DATE OF PURCHASE	03-01-2016	07-01-2017	09-01-2018
c)	USEFUL LIFE(IN YEARS)	17.00	10.00	4.00
d)	DEPRECIATION PER YEAR(a/c)	$     2,604.00	$      1,704.00	$       5,640.00
e)	NO OF DAYS ASSET USED IN THE YEAR OF PURCHASE	364.00	359.00	357.00
		(from 03.1.2016 to 31.12.16)	from 7.01.17 to 31.12.17)	(from 9.1.18 to 31.12.18)
f)	DEPRECIATION UPTO 31.12.19	$         10,402	$            5,084	$           11,156
		(2604*e/366)+(2604*3)	(1704*e/365)+1704*2	(5640*e/365)+5640
g)	CARRYING VALUE AS ON 31.12.19(a-f)	$         33,866	$          11,956	$           11,404

CARRYING AMOUNT OF PATENTS AS ON 31ST DECEMBER 2020(PRIOR TO ADJUSTMENTS
	ASSET	PATENT A	PATENT B	PATENT C	PATENT D
a)	OPENING VALUE AS ON 1.1.2020	$   33,866	$   11,956	$   11,404	$                                     -
b)	ADDITION DURING THE YEAR	$            -	$            -	$            -	$                      37,848.00
c)	DEPRECIATION FOR THE YEAR	$     2,604	$     1,704	$     5,640	$                              2,993
					(37848/9.5)*275/366
d)	CLOSING VALUE(a+b-c)	$   31,262	$   10,252	$     5,764	$                            34,855

	WORKING FOR ANY IMAIRMENT ON PATENT B
CALCULATION OF VALUE IN USE
YEAR	CASH FLOWS	PVF@8%	DISCOUNTED CASH FLOWS
2021	$                                              2,200.00	0.9259	$                                  2,036.98
2022	$                                              2,200.00	0.8573	$                                  1,886.06
2023	$                                              2,200.00	0.7938	$                                  1,746.36
	TOTAL		$                                  5,669.40
SINCE FAIR VALUE LESS COST TO DISPOSAL IS NOT GIVEN RECOVERABLE AMOUNT IS EQUAL TO $ 5669
CARRYING VALUE OF PATENT B	$     10,252
RECOVERABLE VALUE	$       5,669
IMPAIRMENT LOSS	$       4,583
SINCE CARRYING VALUE IS LESS THAN RECOVERABLE VALUE PATENT BE SHOULD BE IMPAIRMENT LOSS OF $ 4583 SHOULD BE RECORDED AND THE REVISED CARRYING VALUE OF PATENT B WILL BE $5669. REVISED CARRYING AMOUNT OF ASSETS AS ON 31.12.2020 PATENT A $                     31,262 PATENT B $                       5,669 PATENT C $                       5,764 PATENT D $                     34,855 TOTAL $                     77,550 NOTE 1: DEPRECIATION ON PATENT B WILL BE CHARGED ON THE NEW CARRYING AMOUNT ON THE REMAINING USEFUL LIFE. NOTE 2: RESEARCH AND DEVELOPMENT COST WILL NOT BE CONSIDERED IN THE COST OF ASSETS BUT WILL BE CHARGED TO PROFIT AND LOSS ACCOUNT.
			REVISED CARRYING AMOUNT OF ASSETS AS ON 31.12.2020
			PATENT A	$                     31,262
			PATENT B	$                       5,669
			PATENT C	$                       5,764
			PATENT D	$                     34,855
			TOTAL	$                     77,550