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SUSINESSCourse Return to course My Subscriptions Question 2 Not complete Marked out of 2.00 P Flag question Determining Carrying Value and Amortization of Intangible Assets Review the following information pertaining to Denzel Company. 1. A patent was purchased on January 2, 2018, for 5104,000 when the remaining legal life was 16 years. On January 2, 2020, Denzel determined that the remaining useful fe of the only eight years from the date of its acquisition. 2. On January 1, 2020, Denzel Company purchased a second patent for $128,000 cash. At January 1, 2020, 6 years of the patent's legal life of 20 years had already expired. 3. On June 30, 2020, Denzel Company paid a firm $12,800 for a new trademark. Denzel considers the life of the trademark to be indefinite 4. On November 1, 2020, Denzel Company acquired all noncash assets and assumed all liabilities of Lee Company at a cash purchase price of $192,000. Denzel determined that the of the identiable net assets acquired in the transaction is $187,200 Note: When answering the following questions, do not round until your firtal answer. Round your final answer to the nearest whole number. Required a. What is the carrying value of intangible assets on December 31, 20207 Assume no impairment losses were recognized in prior periods. 5 b. What is amortization expense for 2020? $ Check Previous Save Answers Next MacBook Air BO

Answer 1

1. Carrying value of patent on 31st december 2020 would be:

Purchase price= $1,04,000

Less Amortization:

Jan 2, 2018 to 31st December 2019= $1,04,000/8 years= $13,000

Value as on 1 jan 2019 =$ 1,04,000 - $13,000 = $91,000

Less amortisation

Jan 1, 2019 to 31st dec 2019 =$ 91,000 /7years =$13,000

Value as on 1 jan 2020 = $91,000 -$13,000= $78,000

Less amortisation

Jan 1,2020 to 31st December 2020= 78,000/6= $13,000

Value of this asset on 31st December 2020= 78,000 - 13,000 = $65,000

2. Carrying value of second patent on 31st December 2020 would be:

Purchase price: $1,28,000

Useful life left =14 years

Amortization expense for 2020= $1,28,000 / 14 years = $9,142.85

Value of asset on 31st December 2020 would be= $1,18,857.15

3. Purchase price of trademark = 12,800

Life = Infinite

Value of trademark on 31st December 2020 would be same i.e. $12,800

4. Since in this point it is mentioned that the company has acquired all the non cash assets but it is not mentioned that these assets are intangible. Thus, for our calculations we will not consider this purchase.

A) Therefore, total value of intangible assets as on 31st December 2020 is: $65,000 + $1,18,857.15 + 12,800

= $1,96,657.15

B) Amortization expense for 2020 would be=$ 22,142.85

i.e. ( $13,000 + $9,142.85)