Question

Tones Industries has the following patents on its December 31, 2016, balance sheet.The following events occurred during the year ended December 31, 2017.

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 9¹/₂ 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, 2017. The controller for Tones estimates the expected future cash flows from Patent B will be as follows.

Patent Item

Initial Cost

Date Acquired

Useful Life at Date Acquired

Patent A

$30,600

3/1/13

17 years

Patent B

$15,000

7/1/14

10 years

Patent C

$14,400

9/1/15

4 years

Year		Expected Future Cash Flows
2018		$2,000
2019		2,000
2020		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.)

-Compute the total carrying amount of Tones’ patents on its December 31, 2016, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.)

-Compute the total carrying amount of Tones' patents on its December 31, 2017, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.) Show work please!

Answer 1