Bluestone Company had three intangible assets at the end of the current year a.
ID: 2527708 • Letter: B
Question
Bluestone Company had three intangible assets at the end of the current year a. A patent purchased this year from Miler Co on January 1 for a cash cost of s6.000. When purchased. the patent had an estimated life of 10 years trademark could be worth as much as $130.000 because it has an indefinite life to have a five year useful life to the company Compute the acquisition cost of each intangible ass b. A trademark was registered with the federal govermment for $4.500. Management estimated that the c. Computer licensing rights were purchased this year on January 1 for 540.000. The rights are expected Required Acquisition Cost Patent Trademark Licensing Rights 2. Compute the amortization of each intangible for the eurrent year ended December 21. Do not round intermediate calculations.) Amortization Expenses Patent ademark Licensing Rights 3. Shaw how these assets and any nelated srpenses Fhould be repored on the balance sheet and income siatement for the urreniyear BLUESTONE COMPANY Income Statement parti For the yeal ending December 31Explanation / Answer
1. Purchase costs and registration costs are the acquisition costs of intangible assets. Accordingly, acquisition costs of following intangible assets are as follows:
2. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, which ever is shorter.
If the useful life of the asset is indefinite, then it cannot be amortized because there is no foreseeable limit to the cash flows generated by those intangible assets. Instead, periodical evaluation of the asset must be made to see if it now has a determinable useful life. If so, begin amortizing it over that period.
Alternatively, if the asset continues to have an indefinite useful life, periodically evaluate it to see if its value has become impaired. If an impairment has occurred, then a loss must be recognized.
Accordingly amortisation expense for intangible assets for the current year ended december 31st is as follows:
3. According to guidelines set forth in generally accepted accounting principles (GAAP), intangible assets are only listed on a company's balance sheet if they are acquired assets and assets with an identifiable value and useful lifespan that can thus be amortized.
If an intangible asset is internally generated, its cost is immediately expensed. For example Often trademarks and trade names are extremely valuable to a company, but if they have been internally developed, they have no recorded asset cost.
Hence patents and licensing rights which are acquired or purchased will appear on balance sheet as assets. They will be recorded at their (acquisition cost - amortisation expense for each year). The cost of trademarks is immediately expensed and thus will apppear on income statement.
Acquisition cost in $ Patent 6000 Trademark 4500 Licensing Rights 40000