Accounting 2 Problems

Accounting 2 Problems

E12-11(Accounting for Patents) Tones Industries has the following patents on its December 31, 2013,

Patent Item    Initial Cost               Date Acquired                     Useful life at Date Acquired

Patent A         30,600                      3/1/10                                              17 years

Patent B         15,000                      7/1/11                                              10 years

Patent C         14,000                      9/1/12                                               4 years

The following events occurred during the year ended December 31, 2014.

1.Research and development costs of $245,700 were incurred during the year.

2.Patent D was purchased on July 1 for $36,480. This patent has a useful life of 9 1/2years.

3.As a result of reduced demands for certain products protected by Patent B, possible impairment of Patent B’s value may have occurred at December 31, 2014. The controller for Tones estimates the expected future cash flows from Patent B will be as follows.

Year     Expected Future Cash Flows

2015                 2,000

2016                 2,000

2017                 2,000

The proper discount rate to be used for these flows is 8%(Assume that the cash flows at the end of the year.)

Instructions

(a)Compute the total carrying amount of Tones’ patent on its December 31, 2013, balance sheet.

(b)Compute the total carrying amount of Tones’ patent on its December 31, 2014, balance sheet.

You have the answer for a I need the answer for b.