Question

Jasper Inc. acquired three patents in January 20x4. The patents have different lives, as indicated in the following schedule:

Cost

Estimated useful life Remaining legal life

Patent A $15,500 10 years   17 years

Patent B 31,250 6 years   7 years

Patent C 65,620 Indefinite    17 years

Patent C is believed to be uniquely useful as long as the company retains the right to use it. In June 20x5, the company unsuccessfully attempted to defend its right to Patent B. Legal fees of $12,700 were incurred in this action. The company year end is December 31.

Required -

Determine the amount of amortization/impairment that should be recognized for 20x4, 20x5, and 20x6.

Answer 1

Depreciation will be charged on the useful life and legal life which ever is Shorter.
Amortisation 2014
Amount of amortisation		Patent A	Patent B	Patent C
Cost of intangible	A	15500.00	31250.00	65620.00
Life of asset (Lower of useful life or Legal life)	B	10	6	17
Amourtisation (2014)	A/B	1550.00	5208.33	3860.00
Amortisation 2015
Amount of amortisation		Patent A	Patent B	Patent C
Amortisation		1550.00	2604.17	3860.00
Add: Cost of legal expense			12700
Add: Balance amount will be charged to P/L as the company was unsuccessful to defent its right (company does not have patent B in future)		0	23437.50	0
Total		1550.00	38741.67	3860.00
Amortisation 2016		Patent A	Patent B	Patent C
Amortisation		1550.00	0.00	3860.00