Question

Presented below is selected information for Cullumber Company.

Answer the questions asked about each of the factual situations.

1. Cullumber purchased a patent from Vania Co. for $1,230,000 on January 1, 2015. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2025. During 2017, Cullumber determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the balance sheet for the patent, net of accumulated amortization, at December 31, 2017?

The amount to be reported

$_________________

Answer 1

	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR PATENT
	Purchase Cost of Patent	$                12,30,000
	Less: Salvage Value	$                               -
	Net Value for Amortization	$                12,30,000
	Usefule life of the Patent	$                              10	Years
	Depreciation per year = Value for Depreciation / 10 years =	$                  1,23,000
	CALCULATION OF THE OPENING BOOK VALUE FOR THE YEAR 2017
	Purchase Value =	$                12,30,000
	Less Amortization in 2 years ($ 123,000 X 2)	$                  2,46,000
	Book Value at the Opening of the year 2017 =	$                  9,84,000
	CALCULATION OF THE REVISE AMORTIZATION EXPENSES PER YEARS
	Opening Balance in the year 2017=	$                  9,84,000
	Less: Revise Salvage Value	$                               -
	Revise Net Value for Depreciation	$                  9,84,000
	Revise Usefule life of the Patent (In Years )	$                                6	Years
	Year Lapse is 2 Years and pending for amortization is only 4 years	$                                4	Years
	Revised Amortization per year = Revise Value for amortization / 4 years =	$                  2,46,000	Per year
	CALCULATION OF THE BOOK VALUE AT DECEMBER 31, 2017
	Opening book value of the patent =	$                  9,84,000
	Less: Amortization expenses of the year 2017	$                  2,46,000
	Closing balance of the patents =	$                  7,38,000
	Answer = Amount to be reported = $ 738,000