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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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Befort Company filed for a patent on a new type of machine. The application costs totaled $12,000. R&D costs incurred to create the machine were $75,000. In the year in which the company filed for and received the patent, it spent $20,000 in the successful defense of a patent infringement suit.

Required:

  1. 1. At what amount should the company capitalize the patent?
  2. 2. Next Level How would you determine the economic life of the patent?

1.

To determine

Ascertain the total capitalized amount of the patent of Company B.

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.

Ascertain the total capitalized amount of the patent as follows:

Total capitalized amount for patent}=[Appli

2.

To determine

Describe the manner in which the economic lives of the patents are evaluated.

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