Question

In: Accounting

Snyder Industries had one patent recorded on its books as of January 1, 2015. This patent...

Snyder Industries had one patent recorded on its books as of January 1, 2015. This patent had a book value of $168,000 and a remaining useful life of 7 years. During 2015, Snyder brought a patent infringement suit against a competitor. On October 1, 2015, Snyder received the goods news that its patent was valid and that its competitor could not use the process Snyder had patented. The company incurred $60,000 to defined this carrying value of the patent. Compute the patent that would be reported on the December 31, 2015, balance sheet, assuming monthly amortization of carrying value of the patents.

Expert Solution

Book value of patent was $168,000 on January 1, 2015 and remaining useful life is of 7 years.

Annual amortization = Book value / useful life in years

= $168,000 / 7

= $ 24,000

Monthly amortization = $ 24,000 / 12 = $ 2,000

Monthly amortization from January 2015 to September 2015 will be $ 2,000 for each month

Total amortization from January 2015 to September 2015 = $ 2,000 * 9 = $ 18,000

On October 1, 2015, Snyder received the goods news that patent infringement suit it decided in favor of Snyder Industries. The company incurred $60,000 to defend the suit. As the decision is in favor of company which means company can further use patent for its economic benefits so cost of defending the suit will be capitalized to the cost of patent

Book value of Patent as on October 1, 2015 = Book value of patent on January 1, 2015 - Accumulated depreciation from January 2015 to September 2015 + cost of defending the patent infringement suit

= $168,000 - $ 18,000 + 60,000

= $ 210,000

Remaining useful life is 75 months ( 84 - 9) (useful life on January 1, 2015 was 7 years i.e. 84 months less 9 months elapsed from January 2015 to September 2015)

Monthly amortization from October 1, 2015 = $ 210,000 / 75 = $ 2,800

Monthly amortization from October 2015 to December 2015 will be $ 2,800 for each month

Total Amortization from January 2015 to December 2015 = ($ 2,000 * 9) + ($ 2,800 * 3)

= $ 26,400

Book value of Patent as on December 31, 2015 = Book value of Patent as on January 1, 2015 - Total Amortization from January 2015 to December 2015 + Additions during the year i.e. cost of defending the patent infringement suit

= $168,000 - 26,400 + 60,000

= $ 201,600

The patent would be reported on the December 31, 2015, balance sheet for $ 201,600

ekkarill92 answered 11 months 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

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...

On January 1, 2015, Thomson Inc. had the following account balances in its shareholders' equity accounts....

On January 1, 2015, Thomson Inc. had the following account balances in its shareholders' equity accounts. Common stock, $1 par, 250,000 shares issued of which 3,000 Shares being held as treasury stock $250,000 Paid-in capital excess of par, common 500,000 Preferred stock, $100 par, 10,000 shares outstanding 1,000,000 Paid-in capital excess of par, preferred 100,000 Retained earnings 2,000,000 Treasury stock, at cost, 3,000 shares 15,000 ...

Eastwind Corp. had $1,000,000 net income in 2015. On January 1, 2015 there were 200,000 shares...

Eastwind Corp. had $1,000,000 net income in 2015. On January 1, 2015 there were 200,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Adcock bought 30,000 shares of treasury stock. On October 1, the company declared a two-for-one stock split. On December 1, 20% stock dividend was issued. There are 30,000 options to buy common stock at $40 a share outstanding. The market price of the common stock averaged $50 during 2015....

On January 1, 2018, Waterway Industries had 394000 shares of its $2 par value common stock...

On January 1, 2018, Waterway Industries had 394000 shares of its $2 par value common stock outstanding. On March 1, Waterway sold an additional 759000 shares on the open market at $20 per share. Waterway issued a 20% stock dividend on May 1. On August 1, Waterway purchased 415000 shares and immediately retired the stock. On November 1, 610000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2018? (Rounded to the nearest...

1.Record the purchase of the patent on january 2,2021

Blossom Company purchases a patent for $1,53,200 cash on january 2,2021.Its legal life is 20 Years and its estimated useful life is 8 Years 1.Record the purchase of patent on january 2,2021 2.Record amortization expense for the year ended December 31,2021

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...

1a. Berry Co. purchases a patent on January 1, 2021, for $35,000 and the patent has...

1a. Berry Co. purchases a patent on January 1, 2021, for $35,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the amortization expensefor the year ended December 31, 2022? 1b. Kansas Enterprises purchased equipment for $75,500 on January 1, 2021. The equipment is expected to have a ten-year service life, with a residual value of $6,750 at the end of ten years. Using the...