Question

Determining Carrying Value and Amortization of Intangible Assets

Review the following information pertaining to Denzel Company.

1. A patent was purchased on January 2, 2018, for $149,500 when the remaining legal life was 16 years. On January 2, 2020, Denzel determined that the remaining useful life of the patent was only eight years from the date of its acquisition.
2. On January 1, 2020, Denzel Company purchased a second patent for $184,000 cash. At January 1, 2020, 6 years of the patent's legal life of 20 years had already expired.
3. On June 30, 2020, Denzel Company paid a firm $18,400 for a new trademark. Denzel considers the life of the trademark to be indefinite.
4. On November 1, 2020, Denzel Company acquired all noncash assets and assumed all liabilities of Lee Company at a cash purchase price of $276,000. Denzel determined that the fair value of the identfiable net assets acquired in the transaction is $269,100.

Note: When answering the following questions, do not round until your final answer. Round your final answer to the nearest whole number.

Required

a. What is the carrying value of intangible assets on December 31, 2020? Assume no impairment losses were recognized in prior periods.

$Answer

b. What is amortization expense for 2020?

$Answer

Answer 1

Answer:-

		$
1	Carrying value of Patent
	The purchase price as on Jan 2, 2018	149500
	Remaining life	16 years
	Amortization for 2 years	149500*2/16
		= 18687.5
	Value as on Jan 2020	149500-18687.5
		130812.5
	New life	8 years
	Amortization	130812.5/8*1
	=	16351.56
	Carrying value of Patent as on 31 Dec 2020	114460.93
2	Second patent value	184000
	Rem life	14 years
	Amortization
	=	184000/14*1
	=	13142.85
	Carrying value of Patent as on 31 Dec 2020	170857.14
3	Carrying value of Trademark as on 31 dec 2020	18400
	(Value remain same)
4	The fair value of Net identifiable assets	276,000
	Less- Cash paid	269,100
	Goodwill(Bal. figure)	6900
a	Carrying value as on 31 Dec 2020
	Patent	114461
	Second patent	170857
	Trademark	18400
	Goodwill	6900
b	Amortisation exp for 2020
	= 16351.56+13142.85	29494
	(calculated earlier)