Problem 12-2 Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a
ID: 2558838 • Letter: P
Question
Problem 12-2 Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows Date Activity Cost 2008-2009 Jan. 2010 March 2010 Jan. 2011 Research conducted to develop precipitator Design and construction of a prototype Testing of models Fees paid engineers and lawyers to prepare patent application; $382,000 89,000 40,600 52,700 patent granted June 30, 2011 Engineering activity necessary to advance the design of the Nov. 2012 Dec. 2013 April 2014 uly 2018 precipitator to the manufacturing stage Legal fees paid to successfully defend precipitator patent Research aimed at modifying the design of the patented precipitator Legal fees paid in unsuccessful patent infringement suit against a 84,500 40,600 41,600 competitor 36,000 Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2016, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company's year ends December 31 Compute the carrying value of patent No. 758-6002-1A on each of the following dates: (a) December 31, 2011 (b) December 31, 2015 (c) December 31, 2018Explanation / Answer
Fields Laboratories a) Patent granted june 30th,2011 $ 52,700.00 Amortization in 2011=($52700/17) $ 3,100.00 Carrying Value 31/12/2011=($52700-$3100) $ 49,600.00 b) Carrying value of Patent on 1/1/2012 $ 49,600.00 Amortization (2012)=($49600/16) $ 3,100.00 Carrying value of Patent on 31/12/2012=($49600-$3100) $ 46,500.00 Carrying Value of Patent on 1/1/2013 $ 46,500.00 Amortization (2013)=($46500/15) $ 3,100.00 Carrying Value of Patent of 31.12.2013 $ 43,400.00 Legal Fees paid for successfully defend precipitator patenton 31.12.2013 $ 40,600.00 Carrying Value of Patent on 1/1/2014 $ 84,000.00 Amortization(2014)=($84000/14) $ 6,000.00 Carrying Value of Patent on 31/12/2014 $ 78,000.00 Carrying Value of Patent on 1/1/2015 $ 78,000.00 Amortization (2015)=($78000/13) $ 6,000.00 Carrying Value of Patent on 31/12/2015 $ 72,000.00 Carrying Value of Patent on 1/1/2016 $ 72,000.00 Amortization (2016)=($72000/5) $ 14,400.00 Carrying Value of Patent on 31/12/2016 $ 57,600.00 Carrying Value of Patent on 1/1/2017 $ 57,600.00 Amortization (2016)=($57600/4) $ 14,400.00 Carrying Value of Patent on 31/12/2017 $ 43,200.00 Carrying Value of Patent on 1/1/2018 $ 43,200.00 Amortization (2016)=($43200/3) $ 14,400.00 Carrying Value of Patent on 31/12/2018 $ 28,800.00 Carrying Value on each of the following dates a) December 31st 2011 $ 49,600.00 b) December 31st 2015 $ 72,000.00 c) December 31st 2018 $ 28,800.00