Question

Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.

Date		Activity		Cost
2008–2009		Research conducted to develop precipitator		$366,000
Jan. 2010		Design and construction of a prototype		88,200
March 2010		Testing of models		21,000
Jan. 2011		Fees paid engineers and lawyers to prepare patent application;
		patent granted June 30, 2011		76,500
Nov. 2012		Engineering activity necessary to advance the design of the
		precipitator to the manufacturing stage		83,000
Dec. 2013		Legal fees paid to successfully defend precipitator patent		21,000
April 2014		Research aimed at modifying the design of the patented precipitator		22,000
July 2018		Legal fees paid in unsuccessful patent infringement suit against a
		competitor		32,000

Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2016, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.

Compute the carrying value of patent No. 758-6002-1A on each of the following dates:

(a)		December 31, 2011		$
(b)		December 31, 2015		$
(c)		December 31, 2018

Answer 1

Solution a) Compute the Caroying value of palent on December 31, 11 : particulars Amount Cost to obtain the patent 76500 Amortization of 2011 (76500/17 years) 4500 72000 Carrying value

6) - Compute the carrying value of patent on December 31, 2015 : particulars -Amount 72000 (4500) ( 4500) 21000 carrying Valve on Jan 1, 2012 Amostization of 2012 ( 76500 | 17 years) Amortization of 2013 ( 76500 / 17 years) Legal fee to defend Total Amortization of 2014 ( 84000/14 years) Amortization of 2015 ( 84000/14 years) Carrying valie 94000 (6000) (6000) 72000 particulars Amount 72000 (14400) (14400) Carrying value on January 01, 2016 Amostization of 2016 (72000 5 years) Amortization of 2017 (720001 5 years) Amortizatron of 2018 ( 73000 / 5 yeary) Coorging value (14400) 28800 The Legal costs in 2018 were expersed because golit was unsuccessful.