Question

Fint industries Ltd had one patent recorded on its books as at January 1, 2023. This patent had a book value of $364,800 and a remaining useful life of 8 years. During 2023, Flint incurred research costs of $142,300 and brought a patent infringement suit against a competiton, On December 1. 2023. Flint received the good news that its patent was valid and that its competitor could not use the process Flint had patented. The company spent $110,500 to defend this patent. At what amount should the patent be reported on the December 31,2023 statement of financial position, assuming monthly strakght-line arnortization of patents?

Answer 1

The patent should be reported on the December 31, 2023 statement of financial position at $328,320.

Step-by-step explanation:

To determine the amount at which the patent should be reported on the December 31, 2023 statement of financial position, we need to calculate the amortization expense and subtract it from the book value of the patent.

Given that the patent has a remaining useful life of 8 years and monthly straight-line amortization is applied, the amortization expense per period can be calculated as:

Amortization Expense = (Book Value of Patent) / (Remaining Useful Life in months)

First, calculate the amortization expense:

Amortization Expense = $364,800 / (8 * 12) = $3,040 per month

Since the patent has been held for the entire year of 2023, the total amortization expense for 2023 will be:

Total Amortization Expense for 2023 = $3,040 x 12 months = $36,480

Next, subtract the total amortization expense from the book value of the patent to determine the amount to be reported on the statement of financial position:

Patent Value on December 31, 2023 = Book Value of Patent - Total Amortization Expense for 2023

Patent Value on December 31, 2023 = $364,800 - $36,480 = $328,320