Question

Larkspur Industries had one patent recorded on its books as of January 1, 2017. This patent had a book value of $412,800 and a remaining useful life of 8 years. During 2017, Larkspur incurred research and development costs of $97,000 and brought a patent infringement suit against a competitor. On December 1, 2017, Larkspur received the good news that its patent was valid and that its competitor could not use the process Larkspur had patented. The company incurred $85,000 to defend this patent. At what amount should patent(s) be reported on the December 31, 2017, balance sheet, assuming monthly amortization of patents?

Answer 1

	carrying amount	life in months	amortization per month	total amortization applied in 2017
patent	412,800	8 years *12 =>96 months	412,800/96 =>4,300	4300*12 =>51,600
legal cost	85,000	96 months - 11 months =>85 months	85,000/85=>1,000	1,000*1 =>1,000
	497,800

carrying amount on december 31 2017

carrying amount	497,800
less:amortization of patent	(51,600)
less:legal cost amortization	(1,000)
carrying amount (12,/31/17)	445,200