Larkspur Industries had one patent recorded on its books as of January 1, 2017.

Question

Larkspur Industries had one patent recorded on its books as of January 1, 2017. This patent had a book value of $412,800 and a remaining useful life of 8 years. During 2017, Larkspur incurred research and development costs of $97,000 and brought a patent infringement suit against a competitor. On December 1, 2017, Larkspur received the good news that its patent was valid and that its competitor could not use the process Larkspur had patented. The company incurred $85,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2017, balance sheet, assuming monthly amortization of patents?

Explanation / Answer

carrying amount on december 31 2017

carrying amount life in months amortization per month total amortization applied in 2017 patent 412,800 8 years *12 =>96 months 412,800/96 =>4,300 4300*12 =>51,600 legal cost 85,000 96 months - 11 months =>85 months 85,000/85=>1,000 1,000*1 =>1,000 497,800

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