Instructions Prepare the necessary entries to clear theIntangible Assets account and to set up separate accounts fordistinct types of intangibles. Make the entries as of December 31,2018, recording any necessary amortization and reflecting allbalances accurately as of that date. (Ignore income tax effects.)P12-2 (LO1,2,4,5) EXCEL (Accounting for Patents) FieldsLaboratories holds a valuable patent (No. 758-6002-1A) on aprecipitator that prevents certain types of air pollution. Fieldsdoes not manufacture or sell the products and processes itdevelops. Instead, it conducts research and develops products andprocesses which it patents, and then assigns the patents tomanufacturers on a royalty basis. Occasionally it sells a patent.The history of Fields patent number 758-6002-1A is as follows.
Date Activity Cost
2008–2009 Research conducted to developprecipitator $384,000
Jan. 2010 Design and construction of aprototype 87,600
March 2010 Testing ofmodels 42,000
Jan. 2011 Fees paid engineers and lawyers toprepare patent application; patent granted June 30,2011 59,500
Nov. 2012 Engineering activity necessary to advance the designof the precipitator to the manufacturingstage 81,500
Dec. 2013 Legal fees paid to successfully defendprecipitator patent 42,000
April 2014 Research aimed at modifying the design of thepatented precipitator 43,000
July 2018 Legal fees paid in unsuccessful patentinfringement suit against a competitor 34,000
Fields assumed a useful life of 17 years when it received theinitial precipitator patent. On January 1, 2016, it revised itsuseful life estimate downward to 5 remaining years. Amortization iscomputed for a full year if the cost is incurred prior to July 1,and no amortization for the year if the cost is incurred after June30. The company’s year ends December 3.
Instructions Compute the carrying value of patent No.758-6002-1A on each of the following dates:
(a) December 31, 2011. (b) December 31, 2015. (c) December 31,2018.
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