Cullumber Company purchased a patent on January 1, 2020 for $712000. The patent had a remaining...

Cullumber Company purchased a patent on January 1, 2020 for $712000. The patent had a remaining useful life of 10 years at that date. In January of 2021, Cullumber successfully defends the patent at a cost of $302400, extending the patent’s life to 12/31/32. What amount of amortization expense would Cullumber record in 2021?

$101440

$71200

$78600

$83600

Solutions

Expert Solution

Cost of patent on January 1, 2020 = $712,000

Useful life = 10 years

Annual amortization expense = Cost of patent on January 1, 2020/ Useful life =

= 712,000/10

= $71,200

Book value of patent at January 1, 2021 = Cost of patent on January 1, 2020- Annual amortization expense

= 712,000-71,200

= $640,800

On January 1, 2021, $302,400 spent to successfully defend the patent. It will increase book value of patent.

Book value of patent on January 1, 2021 after new expenditures = 640,800+302,400

= $943,200

Patent will be use till 12/31/32.

Remaining useful life = 12 years

Amortization expense for 2021 = Book value of patent on January 1, 2021 after new expenditure/ Remaining useful life

= 943,200/12

= $78,600

The amount of amortization expense would Cullumber record in 2021 = $78,600

Third option is correct

Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.

Thanks!!!

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

In January 2014, Penko Co. purchased a patent for $750,000 that had an estimated remaining economic...

In January 2014, Penko Co. purchased a patent for $750,000 that had an estimated remaining economic life of ten years. On January 2, 2017, the company incurred $140,000 in legal fees to successfully defend the validity of the patent. In January 2019, the company incurred $88,000 in legal fees in a infringement lawsuit. In this situation, the lawsuit was lost, and the patent was determined to be worthless as a result. What is the expense to be recognized in 2019...

whargo company purchased a valuable technology patent on January 1, 2020 for $425,000. The patent has...

whargo company purchased a valuable technology patent on January 1, 2020 for $425,000. The patent has a useful life of 21 years and legal life of 17 years. Journalize: (a) the purchese of the parent for cash on January 1, 2020 (b) Amortization of the patent on december 31, 2020

Question 16 Day Company purchased a patent on January 1, 2012 for $600,000. The patent had...

Question 16 Day Company purchased a patent on January 1, 2012 for $600,000. The patent had a remaining useful life of 10 years at that date. In January of 2013, Day successfully defends the patent at a cost of $270,000, extending the patent's life to 12/31/24. What amount of amortization expense would Kerr record in 2013? Question 16 options: A. $60,000 B. $67,500 C. $72,500 D. $90,000 Question 17 Riley Co. incurred the following costs during 2013: Significant modification to...

CSI Products Ltd., a public company, purchased a patent on January 1, 2020, for $ 1,120,000....

CSI Products Ltd., a public company, purchased a patent on January 1, 2020, for $ 1,120,000. At the time of the purchase, the patent had a remaining legal life of 20 years. In January 2023, CSI spent $ 92,000 successfully defending the patent in court. One of the other results of the court case was the discovery that the patent would only have a remaining useful life of 9 years. CSI’s year end was December 31. Instructions Prepare the entries...

Recharge Ltd. purchased a patent on January 1, 2020, for $ 1,120,000. At the time of...

Recharge Ltd. purchased a patent on January 1, 2020, for $ 1,120,000. At the time of the purchase, the patent had a remaining legal life of 20 years. In January 2023, Recharge spent $ 92,000 successfully defending the patent in court. One of the other results of the court case was the discovery that the patent would only have a remaining useful life of 9 years. Recharge’s year end was December 31. Required 1. Prepare the entries on the books...

On January 1, 2020, Cullumber Corporation had $1,125,000 of common stock outstanding that was issued at...

On January 1, 2020, Cullumber Corporation had $1,125,000 of common stock outstanding that was issued at par. It also had retained earnings of $746,500. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $410,000 for the year. Journalize the declaration of a 16% stock dividend on December 10, 2020, for the following independent assumptions. a. Par value is $10, and market price is $19. b. Par value is $5, and market...

1) Cullumber Corporation had 2020 net income of $1,407,000. During 2020, Cullumber has not declared or...

1) Cullumber Corporation had 2020 net income of $1,407,000. During 2020, Cullumber has not declared or paid any dividend on 93,000 non-cumulative preferred shares. Cullumber also had 210,000 common shares outstanding during the year. Calculate Cullumber’s 2020 earnings per share. 2) Sandhill Corporation reported net income of $347,760 in 2020 and had 245,000 common shares outstanding throughout the year. Also outstanding all year were 21,000 (written) options to purchase common shares at $10 per share. The average market price for...

On January 1, 2021, Cullumber Company, a public company, purchased 30% of the common shares of...

On January 1, 2021, Cullumber Company, a public company, purchased 30% of the common shares of Triple Titanium Inc. for $500,000. The remaining shares (70%) are held by the family members of the company’s founder. Cullumber considers this a strategic investment and a critical step into developing consumer markets. Triple Titanium is currently a supplier to Cullumber. Cullumber placed two members on the 10-person board of directors of Triple Titanium and the two members believe they have been influential on...

On January 1, 2016, the Turner Company purchased a patent from the Hanson Company for $172,000....

On January 1, 2016, the Turner Company purchased a patent from the Hanson Company for $172,000. The patent had an estimated useful life of 12 years at that time. On January 1, 2018, the Turner Company incurred legal costs of $42,000 to successfully defended their patent against infringement by another company. On January 1, 2019, the Turner Company purchased a competing patent from the Miller Company for $36,000. They have no plans to use the competing patent in their business....

a. A patent was purchased from the Lou Company for $1,600,000 on January 1, 2016. Janes...

a. A patent was purchased from the Lou Company for $1,600,000 on January 1, 2016. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lou’s accounting records at a net book value of $530,000 when Lou sold it to Janes. b. During 2018, a franchise was purchased from the Rink Company for $680,000. The contractual life of the franchise is 10 years and Janes records a full year of amortization in...

Subjects