Nieland Industries had one patent recorded on its books as of January 1, 2014. T
ID: 2503396 • Letter: N
Question
Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2014, Nieland incurred research and development costs of $96,000 and brought a patent infringement suit against a competitor. On December 1, 2014, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $85,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2014, balance sheet, assuming monthly amortization of patents?
Explanation / Answer
Carrying Amount
Life in Months
Amortization Per Month
Months Amortization
Patent (1/1/14)
$288,000
96
$3,000
12
Legal costs (12/1/14)
85,000
85
$1,000
1
$373,000
Carrying amount...............................................................................
$373,000
Less: Amortization of patent (12 X $3,000)....................................
(36,000)
Legal costs amortization (1 X $1,000)................................
(1,000)
Carrying amount 12/31/14................................................................
$336,000
Carrying Amount
Life in Months
Amortization Per Month
Months Amortization
Patent (1/1/14)
$288,000
96
$3,000
12
Legal costs (12/1/14)
85,000
85
$1,000
1
$373,000
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