Question

13. Oriole Corp. incurred $750,000 of research and development costs to develop a product for which a patent was granted on January 2, 2015. Legal fees and other costs associated with registration of the patent totaled $151,000. On March 31, 2018, Oriole paid $305,000 for legal fees in a successful defense of the patent. The total amount capitalized for the patent through March 31, 2018 should be

Answer 1

The total amount capitalized for the patent through March 31, 2018 should be $456,000

Step-by-step explanation:

All the costs incurred to make the asset usable will be capitalized.

The research cost is the sunk cost because it is already been incurred and it does not affect the decision of making the patent.

Hence the capitalized cost can be calculated as follow

Capitalized cost = Legal Fee for registration + Legal fee of successful defense of the patent

Capitalized cost = $151,000 + $305,000

Capitalized cost = $456,000