In early January 2013, Lerner Corporation applied for a patent, incurring legal costs of $60,000. In January 2014, Lerner incurred $9,000 of legal fees in a successful defense of its patent.

Instructions

(a) Compute 2013 amortization, 12/31/13 carrying value, 2014 amortization, and 12/31/14 carrying value if the company amortizes the patent over 10 years.
(b) Compute the 2015 amortization and the 12/31/15 carrying value, assuming that at the beginning of 2015, based on new market research, Lerner determines that the fair value of the patent is $44,000. Estimated future cash flows from the patent are $49,000 on January 3, 2015.

Question

In early January 2013, Lerner Corporation applied for a patent, incurring legal costs of $60,000. In January 2014, Lerner incurred $9,000 of legal fees in a successful defense of its patent.

Instructions

(a) Compute 2013 amortization, 12/31/13 carrying value, 2014 amortization, and 12/31/14 carrying value if the company amortizes the patent over 10 years.
(b) Compute the 2015 amortization and the 12/31/15 carrying value, assuming that at the beginning of 2015, based on new market research, Lerner determines that the fair value of the patent is $44,000. Estimated future cash flows from the patent are $49,000 on January 3, 2015.

Quizplus · Accepted Answer

The Answer of In early January 2013, Lerner Corporation applied for a patent, incurring legal costs of $60,000. In January 2014, Lerner incurred $9,000 of legal fees in a successful defense of its patent.

Instructions

(a) Compute 2013 amortization, 12/31/13 carrying value, 2014 amortization, and 12/31/14 carrying value if the company amortizes the patent over 10 years.
(b) Compute the 2015 amortization and the 12/31/15 carrying value, assuming that at the beginning of 2015, based on new market research, Lerner determines that the fair value of the patent is $44,000. Estimated future cash flows from the patent are $49,000 on January 3, 2015.

In Early January 2013, Lerner Corporation Applied for a Patent