Sage Hill Industries has the following patents on its December 31, 2019, balance sheet.Patent Item Initial Cost Date Acquired Useful Life at Date AcquiredPatent A $41,616 3/1/16 17 yearsPatent B $15,480 7/1/17 10 yearsPatent C $16,320 9/1/18 4 yearsThe following events occurred during the year ended December 31, 2020.1. Research and development costs of $234,000 were incurred during the year.2. Patent D was purchased on July 1 for $47,196. This patent has a useful life of 91/2 years.3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2020. The controller for Sage Hill estimates the expected future cash flows from Patent B will be as follows. Year Expected Future Cash Flows2021 $2,0002022 2,0002023 2,000The 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 Sage Hill’ patents on its December 31, 2019, balance sheet. Total carrying amount _________Compute the total carrying amount of Sage Hill' patents on its December 31, 2020, balance sheet.Total carrying amount _______

Impairment means drastic decrease in the value of an asset. Impairment loss is calculated as…

Answered: Compute the total carrying amount of…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 40P

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Sage Hill Industries has the following patents on its December 31, 2019, balance sheet.

Patent Item	Initial Cost	Date Acquired	Useful Life at Date Acquired
Patent A	$41,616	3/1/16	17 years
Patent B	$15,480	7/1/17	10 years
Patent C	$16,320	9/1/18	4 years

The following events occurred during the year ended December 31, 2020.

1.		Research and development costs of $234,000 were incurred during the year.
2.		Patent D was purchased on July 1 for $47,196. This patent has a useful life of 9¹/₂years.
3.		As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2020. The controller for Sage Hill estimates the expected future cash flows from Patent B will be as follows.

Year		Expected Future Cash Flows
2021		$2,000
2022		2,000
2023		2,000

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 Sage Hill’ patents on its December 31, 2019, balance sheet.

Total carrying amount _________

Compute the total carrying amount of Sage Hill' patents on its December 31, 2020, balance sheet.

Total carrying amount _______

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