Bluestone Company had three intangible assets at the end of the current year: a.

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 $4,000. When purchased, the patent had an estimated life of 10 years.

b. A trademark was registered with the federal government for $8,500. Management estimated that the trademark could be worth as much as $210,000 because it has an indefinite life.

c. Computer licensing rights were purchased this year on January 1 for $80,000. The rights are expected to have a five-year useful life to the company.

Required:

1. Compute the acquisition cost of each intangible asset.

Acquistion Cost

Patent

Trademark

Licensing Rights

2. Compute the amortization of each intangible for the current year ended December 31. (Do not round intermediate calculations.)

  amortization expenses

Patent

Trademark

Licensing Rights

3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year.

BLUESTONE COMPANY Income Statement (partial) For the year ending December 31

Explanation / Answer

1) Computation the acquisition cost

Patent = 4000

Trademark = 210000 + 8500 = 218500

Licensing Rights = 80000

2) Computation the amortization expense

Patent = 4000/10 = 400

Trademark = 218500/10 = 21850

Note: indefinite life so 10 yeras life is considered as life of asset according to accounting standard

Licensing Rights = 80000 / 5 = 16000

3)

Income statement:

Amortization expense    38250

Balancesheet at year end december:

Fixed assets

Intangibles

Patent                        360

Trademark                 196650

Licensing Rights         64000

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