Raya corporation spent $150,000 developing a new process before achieving economic viability, $40,000 in legal fees to obtain a patent, and $40,000 to market the process that was patented, all in the year 2019. How should these costs be accounted for in 2019? The patent will be reported at $150,000, the $80,000 should be expensed Patent will be reported at $230,000 The patent will be reported at $40,000, the $190,000 should be expensed The patent will be reported at $190,000, the $40,000 should be expensed

Raya corporation spent $150,000 developing a new process before achieving economic viability, $40,000 in legal fees to obtain a patent, and $40,000 to market the process that was patented, all in the year 2019. How should these costs be accounted for in 2019? The patent will be reported at $150,000, the $80,000 should be expensed Patent will be reported at $230,000 The patent will be reported at $40,000, the $190,000 should be expensed The patent will be reported at $190,000, the $40,000 should be expensed

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter5: Business Deductions

Section: Chapter Questions

Problem 29P

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For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a ten-year remaining legal life was purchased for $300,000. The patent will be usable for another eight years. B. A patent was acquired on a new smartphone. The cost of the patent itself was only $24,000, but the market value of the patent is $600,000. The company expects to be able to use this patent for all twenty years of its life.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.
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At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.
How does a company record a patent worth 100,000 if: (a) it has just purchased it for 90,000? (b) the company has internally developed it at a cost of 50,000 and paid 1,000 in legal and filing fees?