Question

Exercise 12-8 Oriole Company has provided information on intangible assets as follows. A patent was purchased from Ford Company for $2,624,000 on January 1, 2016. Oriole estimated the remaining useful life of the patent to be 10 years. The patent was carried in Ford’s accounting records at a net book value of $1,976,000 when Ford sold it to Oriole. During 2017, a franchise was purchased from Polo Company for $585,000. In addition, 6% of revenue from the franchise must be paid to Polo. Revenue from the franchise for 2017 was $2,366,000. Oriole estimates the useful life of the franchise to be 10 years and takes a full year’s amortization in the year of purchase. Oriole incurred research and development costs in 2017 as follows. Materials and equipment $141,800 Personnel 188,300 Indirect costs 108,300 $438,400 Oriole estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses. On January 1, 2017, because of recent events in the field, Oriole estimates that the remaining life of the patent purchased on January 1, 2016, is only 5 years from January 1, 2017. Partially correct answer. Your answer is partially correct. Try again. Prepare the intangibles section of Oriole’s balance sheet at December 31, 2017. (Enter account name only and do not provide descriptive information.)

Answer 1

Answer
value of patent ( WN -1 )	$       16,79,360
Value of franchise ( WN - 2)	$          5,26,500
WN-1
Present Value	$       26,24,000
Life of the patent ( Year )	10
Amortisation per year	$          2,62,400
value after 2 year	$       20,99,200
Revised life of the patent ( Year)	5
Amortisation per year	$          4,19,840
value of patent	$       16,79,360
WN-2
Price of the franchise	$          5,85,000
life of franchise ( years )	10
Amortisation per year	$             58,500
Value of franchise	$          5,26,500
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