Tones 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 $30,600 3/1/16 17 years Patent B $15,000 7/1/17 10 years Patent C $14,400 9/1/18 4 years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $245,700 were incurred during the year. 2. Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9½ 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 Tones 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.) Instructions a. Compute the total carrying amount of Tones' patents on its December 31, 2019, balance sheet. b. Compute the total carrying amount of Tones' patents on its December 31, 2020, balance sheet.
Tones 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 $30,600 3/1/16 17 years Patent B $15,000 7/1/17 10 years Patent C $14,400 9/1/18 4 years The following events occurred during the year ended December 31, 2020. 1. Research and development costs of $245,700 were incurred during the year. 2. Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9½ 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 Tones 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.) Instructions a. Compute the total carrying amount of Tones' patents on its December 31, 2019, balance sheet. b. Compute the total carrying amount of Tones' patents on its December 31, 2020, balance sheet.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 1C: In examining Samson Manufacturing Companys books, you find on the December 31, 2019, balance sheet...
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Question
Tones 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 |
$30,600
|
3/1/16
|
17 years
|
| Patent B |
$15,000
|
7/1/17
|
10 years
|
| Patent C |
$14,400
|
9/1/18
|
4 years
|
The following events occurred during the year ended December 31, 2020.
- 1. Research and development costs of $245,700 were incurred during the year.
- 2. Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9½ 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 Tones estimates the expected future cash flows from Patent B will be as follows.
YearExpected Future Cash Flows2021$2,00020222,00020232,000
The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)
Instructions
a. Compute the total carrying amount of Tones' patents on its December 31, 2019, balance sheet.
b. Compute the total carrying amount of Tones' patents on its December 31, 2020, balance sheet.
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