Question

Tamarisk 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 $44,676 3/1/16 17 years Patent B $17,280 7/1/17 10 years Patent C $23,520 9/1/18 4 years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $249,000 were incurred during the year. 2. Patent D was purchased on July 1 for $46,512. 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 Tamarisk estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows 2021 $1,850 2022 1,850 2023 1,850 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.) Click here to view factor tables

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

Answer 1

working as follows:

	Initial cost	Date acquired	Useful life at the date acquired (Yrs.)	Annual amortization	Period up to 12/31/2019	Accumulated Amortization	Book value 12/31/2019
Patent A	$44,676	3/1/16	17	$2,628	3 Y 10M	$10,074	$34,602
Patent B	$17,280	7/1/17	10	$1,728	2 Y 6M	$4,320	$12,960
Patent C	$23,520	9/1/18	4	$5,880	1 Y 4M	$7,840	$15,680
							$63,242

Carrying amount of patents on December 31, 2019 = $63,242