Blue Spruce Industries Ltd. had one patent recorded on its books as at January 1

Question

Blue Spruce Industries Ltd. had one patent recorded on its books as at January 1, 2017. This patent had a book value of $360,200 and a remaining useful life of 9 years. During 2017, Blue Spruce incurred research costs of $137,100 and brought a patent infringement suit against a competitor. On December 1, 2017, Blue Spruce received the good news that its patent was valid and that its competitor could not use the process Blue Spruce had patented. The company spent $104,200 to defend this patent. At what amount should the patent be reported on the December 31, 2017 statement of financial position, assuming monthly straight-line amortization of patents? (Round answer to 0 decimal places, e.g. 5,275.)

Explanation / Answer

Cost of Patents on Jan 2017 360200 Remaining Life 9 Research cost 137100 Legal cost of defending the patents 104200 Cost of Patents on Jan 2017 601500 (360200+137100+104200) Divide: Life 9 Annual amortization 66833.33 Book value of Patents n Dec31 2017 534666.7

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