Question

Hard Corp. incurred $1,260,000 of research and development costs to develop a product for which a patent was granted on January 2, 2008. Legal fees and other costs associated with registration of the patent totaled $240,000. On March 31, 2013, Lopez paid $450,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2013 should be

A) $1,710,000.
B) $690,000.
C) $1,500,000.
D) $1,950,000.

Answer 1

The amount capitalized for the patent through March 31, 2013, is the sum of the registration costs and the costs to successfully defend the patent, totaling $690,000.

Step-by-step explanation:

According to the accounting standards related to intangible assets, research and development (R&D) costs are typically expensed as incurred, while costs to secure a patent are often capitalized. The initial R&D costs of $1,260,000 incurred by Hard Corp. would not be capitalized but expensed.

However, the legal fees and other costs of $240,000 associated with the registration of the patent on January 2, 2008, are costs that can be capitalized. Additionally, the $450,000 spent on legal fees for the successful defense of the patent is also a cost that can generally be capitalized. Therefore, the total amount capitalized for the patent through March 31, 2013, would be the sum of the initial registration costs and the defense costs, which is $240,000 + $450,000 = $690,000.

The final answer in 2 lines:
B) $690,000 is the amount capitalized for the patent through March 31, 2013.