Larkspur Industries has the following patents on its December 31, 2016, balance
ID: 2585133 • Letter: L
Question
Larkspur Industries has the following patents on its December 31, 2016, balance sheet.
Patent Item
Initial Cost
Date Acquired
Useful Life at Date Acquired
The following events occurred during the year ended December 31, 2017.
Year
Expected Future Cash Flows
The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)
Compute the total carrying amount of Larkspur' patents on its December 31, 2017, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.)
Patent Item
Initial Cost
Date Acquired
Useful Life at Date Acquired
Patent A $41,004 3/1/13 17 years Patent B $15,120 7/1/14 10 years Patent C $14,880 9/1/15 4 yearsExplanation / Answer
Total carrying amount= 79626
Cost Use ful life years Use ful life months Amortisation per month Date acquired Months passed Accumulated amortisation Net book value a b c=b*12 d=a/c e f=d*e g=a-f Patent A 41004 17 204 201 3.1.13 58 11658 29346 Patent C 14880 4 48 310 9.1.15 28 8680 6200 Patent D 41496 9.5 114 364 7.1.17 6 2184 39312 Patent B 15120 10 120 126 7.1.14 42 5292 9828 Net book value 84686 Less: Impairment for patent B -5060 Total value ofpatents 79626 Impairment of patent B: Step 1: Net book value (9828) is less than the undiscounted future cash flows (5550). There is impairment Amount of impairment= Net book value - Present value of cash flows =9828-4768 5060 Present value of cash flows: 2018 2019 2020 Total Cash flow 1850 1850 1850 5,550.00 Discount factor@8% 0.92592593 0.85733882 0.79383224 2.58 Present value 1,712.96 1,586.08 1,468.59 4,767.63Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.