Question

Janes Company provided the following information on intangible assets: a. A patent was purchased from the Lou Company for $1,600,000 on January 1, 2019. Janes estimated the remaining useful life of the patent to be 10 years.

a.The patent was carried on Lou's accounting records at a net book value of $530,000 when Lou sold it to Janes.
b. During 2021, a franchise was purchased from the Rink Company for $680,000. The contractual life of the franchise is 10 years and Janes records a full year of amortization in the year of purchase.
C. Janes incurred research and development costs in 2021 as follows: Materials and supplies Personnel Indirect costs $ 158,000 198,000 78,000 $434,000 Total
d. Effective January 1, 2021, based on new events that have occurred, Janes estimates that the remaining life of the patent purchased from Lou is only five more years.

Answer 1

The question pertains to the financial implications of intangible assets, specifically patents and franchises, on a business. Janes Company purchased a patent and franchise, and incurred research and development costs.

Step-by-step explanation:

Intangible assets, such as patents and franchises, have important financial implications for businesses. In this scenario, Janes Company purchased a patent from the Lou Company for $1,600,000 with an estimated remaining useful life of 10 years.

The patent was carried on Lou's accounting records at a net book value of $530,000 when it was sold to Janes. In 2021, Janes also purchased a franchise from the Rink Company for $680,000 with a contractual life of 10 years. Janes records a full year of amortization in the year of purchase.

Additionally, Janes incurred research and development costs in 2021, totaling $434,000. These costs include materials and supplies, personnel expenses, and indirect costs.

Lastly, based on new events, Janes now estimates that the remaining life of the patent purchased from Lou is only five more years, effective from January 1, 2021.