Patent Item Initial Cost Date Acquired Useful Life at Date Acquired The followin
ID: 2488119 • Letter: P
Question
Patent Item
Initial Cost
Date Acquired
Useful Life at Date Acquired
The following events occurred during the year ended December 31, 2014.
Year
Expected Future Cash Flows
The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)
Tones Industries has the following patents on its December 31, 2013, balance sheet.
Compute the total carrying amount of Tones’ patents on its December 31, 2013, balance sheet. (Round all answers to 0 decimal places, e.g. 8,564)
Total carry amount $_________
Compute the total carrying amount of Tones' patents on its December 31, 2014, balance sheet. (Round all answers to 0 decimal places, e.g. 8,564)
Total carrying amount $________
Patent Item
Initial Cost
Date Acquired
Useful Life at Date Acquired
Patent A $50,592 3/1/10 17 years Patent B $17,040 7/1/11 10 years Patent C $19,200 9/1/12 4 yearsExplanation / Answer
Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Amortization per year Amortization Amt 2010 Amortization Amt 2011 Amortization Amt 2012 Amortization Amt 2013 Amortization Amt 2014 Carrying Value Dec 31.2013. Carrying Value Dec 31.2014. Patent A $50,592 3/1/2010 17 years 2,976 2,480 2,976 2,976 2,976 2,976 39,184 36,208 Patent B $17,040 7/1/2011 10 years $1,704 0 852 $1,704 $1,704 $1,704 12,780 11,076 Patent C $19,200 9/1/2012 4 years 4,800 1,600 4,800 4,800 12,800 8,000 Patent D 34,314 7/1/2014 9.5 years 3,612 1,806 - 32,508 Internal R & D costs will be expensed out unless specifically determinable benefits can be ascertained. So R& D cost of $245350 will be expensed out. Patent B Year 2015 Year 2016 Year 2017 Total Expected Future cash flows 2,150 2,150 2,150 6,450 As undiscounted cash flow is less than Carrying value , there is impairment of patent D. Patent B Year 2015 Year 2016 Year 2017 Total Expected Future cash flows 2,150 2,150 2,150 6,450 Discount factor @8% 0.926 0.857 0.794 PV of Cash flows 1,991 1,843 1,707 PV of Cash flows $ 5,540.76 So Impaired value of Patent B = $ 5,540.76 Patent Item Carrying Value Dec 31.2013. Carrying Value Dec 31.2014. Patent A $ 39,184.00 $ 36,208.00 Patent B $ 12,780.00 $ 5,540.76 Patent C $ 12,800.00 $ 8,000.00 Patent D $ - $ 32,508.00 Patent Item Carrying Value Dec 31.2013. Carrying Value Dec 31.2014. Patent A $ 39,184.00 $ 36,208.00 Patent B $ 12,780.00 $ 5,540.76 Patent C $ 12,800.00 $ 8,000.00 Patent D $ - $ 32,508.00 Total Carrying Value $ 64,764.00 $ 82,256.76