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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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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?

To determine

Explain the manner in which the patent worth of $100,000 would record, if

(a) Patent is purchased for $90,000

(b) Company has internally developed it at a cost of $50,000 and paid $1,000 for legal and filing fees.

Explanation

Patent: Patent is a right that is exclusively granted by the Government to an individual or firm to process or design, to make, use or sell its invention for a limited period. It protects the right of the inventor from doing so by any other individual till the granted period expires.

Explain the manner in which the patent worth of $100,000 would record as follows:

A company records the patent at its purchase price when a patent is purchased from the third party. If the patent is developed internally, then the costs that are associated with obtaining legal rights and successfully defending is considered as the cost of patent...

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