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 by Penko with regard to the patent?

Expert Solution

Patent Amortization Expenses for 2019 is $1,09,667

Calculate patent amortization expenses for 2019 :
Patent cost (2014)	7,50,000
Less: Amortization expenses upto Jan 2017 (7,50,000/10)*3 Years	2,25,000
Carrying value on jan 2017	5,25,000
Add: Legal cost	1,40,000
Patent cost ( Jan 2017)	6,65,000
Amortization expenses per year 2017 (6,65,000/7)	95,000
Carrying value on jan 2018	5,70,000
Add: Legal cost	88,000
Patent cost (2018)	6,58,000
Amortization expenses per year 2018 (6,58,000/6)	1,09,667
Patent cost ( Jan 2019)	5,48,333
Amortization expenses per year 2018 (5,48,333/5)	1,09,667
Patent cost ( Jan 2020)	4,38,666

Jan 2017
Estimated remaining life ( 10years – 3 years = 7 years)

Jan 2018
Estimated remaining life ( 7years – 1 years = 6 years)

2019
Estimated remaining life ( 7years – 2 years = 5 years)

ekkarill92 answered 2 years ago

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

In January 2014 TRX Limited purchased a patent for X1 $100000. At the time of purchase,...

In January 2014 TRX Limited purchased a patent for X1 $100000. At the time of purchase, the patent was valid for 20 years. Due to the nature of the product, however, the patent was estimated to have a useful life of only 10 years. In December 2015 after an in-depth market survey, it was discovered that a new much-improved product had just been launched in the market due to which sales of X1 had dropped drastically the patent was now...

On January 1, 2015, Toshi Limited purchased a machine for $750,000. The machine was estimated to...

On January 1, 2015, Toshi Limited purchased a machine for $750,000. The machine was estimated to have a 20 year useful life with a residual value of $100,000. The company used the straight-line method to depreciate the machine. On December 31, 2019, the company sold the equipment for $600,000 cash Required Calculate the gain or loss on sale on the sale of the machine. Prepare the journal entry to recognize the sale of the machine. Requirement # 1 DATE ACCOUNT...

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...

ABC Co. purchased a machine on April 1, 2014 for $82,000 with an estimated useful life...

ABC Co. purchased a machine on April 1, 2014 for $82,000 with an estimated useful life of 6 years and salvage value of $4,000. They sold the machine on July 1, 2019, for $15,000. Assuming ABC Co. uses the straight line method of depreciating its assets, the journal entry to record the sale of the machine would include a: A. Debit to Loss for $1,250 B. Credit to Machine for $13,750 C. Credit to Gain for $1,250 D. Credit to Accumulated Depreciation...

Martinez, Inc. acquired a patent on January 1, 2017 for $41,300 cash. The patent was estimated...

Martinez, Inc. acquired a patent on January 1, 2017 for $41,300 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $26,300. Required: Prepare the journal entry to record the acquisition...

Kingston, Inc., acquired a patent on January 1, 2016 for $40,000 cash. The patent was estimated...

Kingston, Inc., acquired a patent on January 1, 2016 for $40,000 cash. The patent was estimated to have a useful life of 10 years with no residual value, and the firm decided to use straight-line amortization. On January 1, 2017, management determined that the remaining useful life was actually only 6 years. On June 30, 2018, the patent was sold for $25,000. 1.Show the journal entry to record the acquisition of the patent on January 1, 2016 (3 points). 2....

Martinez, Inc. acquired a patent on January 1, 2017 for $40,900 cash. The patent was estimated...

Martinez, Inc. acquired a patent on January 1, 2017 for $40,900 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $25,900. Required: Prepare the journal entry to record the acquisition...

Martinez, Inc. acquired a patent on January 1, 2017 for $40,500 cash. The patent was estimated...

Martinez, Inc. acquired a patent on January 1, 2017 for $40,500 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $25,500. Required: Prepare the journal entry to record the acquisition...

A. Roberson Corporation was organized on January 1, 2014, with authorized capital of 750,000 shares of...

A. Roberson Corporation was organized on January 1, 2014, with authorized capital of 750,000 shares of $10 par value common stock. During 2014, Roberson issued 30,000 shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and sold 3,000 shares of treasury stock at $14 per share. What is the amount of Additional paid-in capital on December 31, 2014? B. Roberson Corporation purchases 3,000 shares of its own $5 par common stock for $8 per...

Question