Question

Betty Foods has separate patents for its chocolate chip cookie dough and vanilla ice cream. In the current year, both patents were challenged in court. Betty Foods spent $240,000 in legal fees to successfully defend its cookie dough, and $300,000 in legal fees in an unsuccessful defense of its vanilla ice cream.

For what amount can Betty Foods capitalize these costs?

Amount Capitalized _______________

Answer 1

As per the law in case of legal fees related to patents only successful defence legal fees can be capitalised. Unsuccessful defense legal fees cannot be capitalised hence it should be expensed.

So in the above case Betty Foods spent $ 240,000 in legal fees to successfully defend its cookie dough and $ 300,000 in legal fees to unsuccessful defense of its vanilla ice cream.

Hence amount of legal fees which is successfully defended of cookie dough amounting ro $240,000 will be capitalised and amount of$300,000 related to legal fees of unsuccessful defend of vanilla ice cream will be expensed.

Hence amount capitalised will be $240,000.