Bluestone Company had three intangible assets at the end of the current year: a.
ID: 2416260 • Letter: B
Question
Bluestone Company had three intangible assets at the end of the current year: a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $5,600. When purchased, the patent had an estimated life of 8 years. b. A trademark was registered with the federal government for $12,500. Management estimated that the trademark could be worth as much as $290,000 because it has an indefinite life. c. Computer licensing rights were purchased this year on January 1 for $48,000. The rights are expected to have a four-year useful life to the company
Explanation / Answer
1) The acquisition cost of the intangibles will be:
a) Patent acquisition cost = $5,600
The entry on January 1, would be:
Patents Dr 5,600
Cash 5,600
b) The acquisition cost of the trade mark = $12,500
The entry for acquisition will be:
Trade Mark Dr 12,500
Cash Cr 12,500
c) Acquisition cost of Computer licence = $48,000
The entry for the purchase will be:
Computer licence Dr 48,000
Cash Cr 48,000
2) Amortization for the year:
a) Patent = 5600/8 = $700
b) Trademark is not amortized as it has indefinite life.
c) Computer licence = 48000/4 = $12,000
3) Reporting:
BALANCE SHEET (Partial)
Intangible Assets (Note 1) $53,400
INCOME STATEMENT (Partial)
as part of continuing operations:
Amortization Expense $12,700
Intangible Assets: Amortized As of december 31 Gross Accumulated carrying Amortization amount Patent 5,600 700 Computer licence 48,000 12,000 53,600 12,700 Unamortized Trade Mark 12,500 66,100 Aggregate Amortization Expense 12,700