Gami Corp. obtained a 12-year patent for its specialized manufacturing process at a cost of $240651....

Gami Corp. obtained a 12-year patent for its specialized manufacturing process at a cost of $240651. This cost includes $40353 that was spent in legal costs defending it. The estimated useful life of the patent is 7 years. What will be the annual depreciation expense for Gami’s patent?

Select one:

a. $28614

b. $16692

c. $20054

d. $34379

Expert Solution

Answer)

Calculation of Annual depreciation on patent

Annual depreciation on patent = Total cost of patent/ Estimated useful Life of the patent

= $ 240,651/ 7 years

= $ 34,379 (rounded off)

Therefore annual depreciation in the patent of the company will be $ 34,379 and the correct option in the given question is (d) $ 34,379.

Note: In the given case, the patent is obtained by the company on its special manufacturing process. Thus it is a self generated patent and accordingly filing cost, documentation cost, etc. Associated with the patent is included in cost of patent. Also, legal fees associated with the patent is also capitalized and thus included in the cost of the patent if the patent is successfully defended.

Accordingly, in the given case legal fees of $ 40,353 in defending the patent will be included in its cost of acquisition and will be depreciated over its useful life.

ekkarill92 answered 2 years ago

1. You are the manager of a large firm that has obtained a patent on its...

1. You are the manager of a large firm that has obtained a patent on its unique low-carbohydrate energy bars. As such, you are the only firm that sells this unique type of energy bar in the United States. An economist that you have hired estimated that the demand function for energy bars is Q = 200 – 2P and you have estimated your cost function is C(Q) = 50 + 5Q2. This implies that MC(Q) = 10Q. a. What...

beta corp wants to invest $10M in new equipment to enhance its manufacturing process. This will...

beta corp wants to invest $10M in new equipment to enhance its manufacturing process. This will result in additional (taxable) cash inflows of $1.1M annually for the next 15 years.The equipment will be depreciated over 10 years (no savage value. Assume a current corporate tax rate of 34% and a discount rate of 5%. Evaluate this investment for each of the following four situations: a. Marginal tax rate will decrease to 25% at the end of year 5. b. the...

Headland Corp. has a patent with a cost of $401,000 and accumulated amortization of $330,000, which...

Headland Corp. has a patent with a cost of $401,000 and accumulated amortization of $330,000, which was not used as frequently during the current year. Management has determined that undiscounted future cash flows are $69,200 while the discounted cash flows are $62,280. The fair value of the equipment is $74,300 and would cost management $4,200 to sell it. Headland Corp. has asked you, to prepare any impairment loss journal entries required under (1) IFRS and (2) ASPE.

Northwood Corp, purchased new equipment to be used in its manufacturing plant. The cost of the...

Northwood Corp, purchased new equipment to be used in its manufacturing plant. The cost of the equipment was $250,000 including $5,000 freight and $12,000 of taxes. In addition to the equipment cost, Northwood paid $10,000 to install the equipment and $7,500 to train its employees to use the equipment. Over the asset's life, Northwood paid $35,000 for repair and maintenance. At the end of five years, Northwood extended the life of the asset by rebuilding the equipment's motors at a...

Concept of cost of capital and WACC Mace Manufacturing is in the process of analyzing its...

Concept of cost of capital and WACC Mace Manufacturing is in the process of analyzing its investment decision-making procedures. Two projects evaluated by the firm recently involved building new facilities in different regions, North and South. The basic variables surrounding each project analysis and the resulting decision actions are summarized in the following table. Basic variables North South Initial cost −$6 million −$5 million Life 15 years 15 years Expected return 8% 15% Least-cost financing Source Debt Equity Cost (after-tax)...

Corp X has a patent with a book value of $4,000. Before its pending litigation, the...

Corp X has a patent with a book value of $4,000. Before its pending litigation, the company assumed a 3-year useful life of this patent with annual cash inflows of $3,000. After a judge awarded the company a decision defending its patent, the company new expectations increased the useful life of the patent to 5 years, its cash flow to $4,000 a year. Please provide the accounting issues and how the company should account for this?

With an average of 24,000 units every year in its manufacturing process. The supply chain partner...

With an average of 24,000 units every year in its manufacturing process. The supply chain partner who charges a price per unit of $3000 for the component. Each order costs $500 to process. the operations manager wants to factor in inventory holding cost at 13.75% of the unit cost. (1) Determine the economic order quantity (EOQ) and total annual cost if ordering the EOQ number of units. How much will DBS be able to save by adopting the EOQ versus...

In a process cost flow, which of the manufacturing cost accounts (Raw Materials Inventory, Manufacturing Overhead,...

In a process cost flow, which of the manufacturing cost accounts (Raw Materials Inventory, Manufacturing Overhead, and Factory Labor) is debited at the time the costs are incurred and credited at the time the costs are assigned to Work in Process accounts?

The following information pertains to Hague Corp.’s Year 2 cost of goods sold: Inventory, 12/31/Year 1...

The following information pertains to Hague Corp.’s Year 2 cost of goods sold: Inventory, 12/31/Year 1 Year 2 purchases Year 2 write-off of obsolete inventory Inventory, 12/31/Year 2 $180,000 248,000 68,000 60,000 The inventory written off became obsolete because of an unexpected and unusual technological advance by a competitor. In its Year 2 income statement, what amount should Hague report as cost of goods sold? A. $436,000 B. $368,000 C. $300,000 D. $248,000 [2] During December of Year 1, Nile...

Palantir Corp. sells specialized equipment to the healthcare industry. Palantir pays its sales agents a salary...

Palantir Corp. sells specialized equipment to the healthcare industry. Palantir pays its sales agents a salary plus a 5% commission on sales. Sales agents employed by the company sold 10 Osgilith MRI machines that were delivered and installed in January 2017. The MRI machine sells for $45,600 due at the end of 12 months. Alternatively, customers may elect to pay $40,000 at delivery and installation. All customers purchasing machines during January elected to pay at the end of the 12-month...

Question