Vaden Company purchased a patent from Williams Co. for $260,000 on January 1, 2016 when there was 15 years remaining in the legal life of the patent. Vaden estimates that the useful life of the patent will be 10 years from the date of acquisition. Expenditures of $25,000 for successful litigation in defense of the patent were paid on January 1, 2022. Required: a. Compute the carrying value of the patent at December 31, 2022. b. At the beginning of 2023, new market research indicates that the fair value of the patent is $90,000. Estimated future cash flows from the patent are $94,000 on January 1, 2023. Determine if the patent is impaired and, if so, prepare the journal entry necessary.
Vaden Company purchased a patent from Williams Co. for $260,000 on January 1, 2016 when there was 15 years remaining in the legal life of the patent. Vaden estimates that the useful life of the patent will be 10 years from the date of acquisition. Expenditures of $25,000 for successful litigation in defense of the patent were paid on January 1, 2022. Required: a. Compute the carrying value of the patent at December 31, 2022. b. At the beginning of 2023, new market research indicates that the fair value of the patent is $90,000. Estimated future cash flows from the patent are $94,000 on January 1, 2023. Determine if the patent is impaired and, if so, prepare the journal entry necessary.
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
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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V4. 3. Vaden Company purchased a patent from Williams Co. for $260,000 on January 1, 2016 when there was 15 years remaining in the legal life of the patent. Vaden estimates that the useful life of the patent will be 10 years from the date of acquisition. Expenditures of $25,000 for successful litigation in defense of the patent were paid on January 1, 2022. Required: a. Compute the carrying value of the patent at December 31, 2022. b. At the beginning of 2023, new market research indicates that the fair value of the patent is $90,000. Estimated future cash flows from the patent are $94,000 on January 1, 2023. Determine if the patent is impaired and, if so, prepare the journal entry necessary.
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