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Splish Brothers Industries has the following patents on its December 31, 2019, balance sheet. Patent Item...

Splish Brothers 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 $42,228 3/1/16 17 years
Patent B $15,840 7/1/17 10 years
Patent C $17,760 9/1/18 4 years


The following events occurred during the year ended December 31, 2020.

1. Research and development costs of $237,000 were incurred during the year.
2. Patent D was purchased on July 1 for $28,956. 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 Splish Brothers estimates the expected future cash flows from Patent B will be as follows.

Year

Expected Future Cash Flows
2021 $2,150
2022 2,150
2023 2,150


The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)

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(a)

Compute the total carrying amount of Splish Brothers’ patents on its December 31, 2019, balance sheet.

Total carrying amount

B) Compute the total carrying amount of Marin' patents on its December 31, 2020, balance sheet.

Total carrying amount $

Solutions

Expert Solution


ekkarill92 answered 1 year ago
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