Question

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Kreiser Company had three intangible assets at the end of 2014 (end of the accounting year): a. A patent was purchased from J. Miller on January 1, 2014, for a cash cost of $5,625. When purchased, the patent had an estimated life of 15 years. b. A trademark was registered with the federal government for $21,000. Management estimated that the trademark could be worth as much as $200,000 because it has an indefinite life. c. Computer licensing rights were purchased on January 1, 2014, for $59,600. The rights are expected to have a four-year useful life to the company. Required: 1. Compute the acquisition cost of each intangible asset. Acquisition cost: Patent Trademark Licensing rights 2. Compute the amortization of each intangible for the year ended December 31, 2014 Amortization expense Patent Trademark Licensing rights 3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for 2014 Partial Income Statement for 2014:

Answer 1

Ans:

Ans:

1. Cost of Acquisition :

	Amount($)
Patent	5,625
Trademark	21,000
Licensing Right	59,600

2. Computation of Amortization expenses for 2014:

	Amount($)
Patent	375	5,625/15
Trademark	Nil	(Because of Indefinite life)
Licensing Right	14,900	59,600/4

3. In Income Statement:

	Amount($)
Amortization of Intangible Assets (375+14,900)	15,275
Total	15,275

4.

Balance sheet
Patent	5625
Trade mark	21000
Licensing rights	59600
Accumulated amortisation -Patent	(375)
Accumulated amortisation licensing right	(14,900)
Total Intangibles	$70,950