On January 2,2011, Memorial Company purchased a patent for $380,000. The company
ID: 2491483 • Letter: O
Question
On January 2,2011, Memorial Company purchased a patent for $380,000. The company believed this patent would be productive for another 10 years. On January 2,2013, the company was sued for patent infringement and spent $49,000 in legal fees to defend the patent. Memorial's lawyers were successful in their defense of the patent. In early January 2016, the company was sued once again for patent infringement and incurred legal fees of $20,000 defending the patent. The company lost this lawsuit. With regard to this patent, what is the expense reported on the 2016 income statement?
A)$65,000
B)$210,000
C)234,500
D)$245,000
E)None of the above. The answer is __________
The Cubs have a player contract with Anthony that is recorded on the Cubs accounting records at $3,000,000. The White Sox have a player contract with Dominic that is recorded on the White Sox accounting records at $2,800,000. If the two teams trade contracts without any boot (assuming no commercial substance) how much will the new contract received be recorded on each of the team's books?
Cubs White Sox
A)$2,800,000 $2,800,000
B)$2,800,000 $2,900,000
C)$2,900,000 $3,000,000
D)$3,000,000 $2,900,000
E)None of the above. The answer is__________
Explanation / Answer
B- The Answer IS $210000
2- If there is no commercial substance for exchanged assets, then the acquired asset should be recorded at the book value of the asset given up in the exchange. There are additional issues related to the recognition of a gain or loss when a transaction has no commercial substance.
A)$2,800,000 $2,800,000
Purchase Cost $380,000.00 Useful Life 10 year Amortization per year $38,000.00 Book value at begning of 2013 $304,000.00 Legal Expense if Capitalized Revised Book Value $304,000.00 Amortization per year $38,000.00 Book value at begning of 2016 $190,000.00 Legal Expense in 2016 $20,000.00 Total Expense for 2016 $210,000.00Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.