The intangible asset section of Company at December 31, 2016, is presented below:
Patent A ($90,000 cost less $9,000 amortization)
$81,000
Copyright ($48,000 cost less $19,200 amortization)
$28,800
Total Intangibles
$109,800
Patent A was acquired in January of 2016 and has a useful life of 10 years. When the copyright was purchased, it had a remaining legal life of 60 years, but Desert projected it would generate revenues for only 10 years.
The following transactions may have affected intangible assets during 2017:
June 30: Paid $29,750 legal costs to successfully defend Patent A against infringement. Desert estimates the patent's useful life remained unchanged from the date they placed it into service.
Jan-Aug: Developed a new product incurring $250,000 in research and development costs. Patent B was granted on September 1. Legal fees of $61,200 were incurred in filing for this patent. The company will amortize the cost of the patent over its legal life of 20 years.
Dec 31: At year end (after recording amortization for the current year), Desert felt it was necessary to evaluate the copyright for impairment. Under current market conditions at Dec 31, 2017, the fair value of the copyright was determined to be $18,000. Desert intends to continue to use the patent for at least three more years and estimates future net cash flows to be $7,000 per year.
Determine the Amortization Expense to be reported on the Income Statement for the period ending December 31, 2017 for Patent A:
Using the information in the question above, determine the net book value that would appear on the December 31, 2017 Balance Sheet for:
Patent A
Patent B
Copyright
