Question

2. Review the following information pertaining to Denzel Company. 1. A patent was purchased on January 2, 2018, for $65,000 when the remaining legal life was 16 years. On January 2, 2020, Denzel determined that the remaining useful life of the patent was only eight years from the date of its acquisition. On January 1, 2020, Denzel Company purchased a second patent for $80,000 cash. At January 1, 2020, 6 years of the patent's legal life of 20 years had already expired. 3. On June 30, 2020, Denzel Company paid a firm $8,000 for a new trademark. Denzel considers the life of the trademark to be indefinite. 4. On November 1, 2020, Denzel Company acquired all noncash assets and assumed all liabilities of Lee Com- pany at a cash purchase price of $120,000. Denzel determined that the fair value of the identifiable net assets acquired in the transaction is $117,000. Required a. What is the carrying value of intangible assets on December 31, 2020? Assume no impairment losses were recognized in prior periods. b. What is amortization expense for 2020?

Answer 1

		$
1	Carrying value of Patent
	The purchase price as on Jan 2, 2018	65,000
	Remaining life	16 years
	Amortization for 2 years	65000*2/16
		=    8125
	Value as on Jan 2020	65000-8125
		56,875
	New life	8 years
	Amortization	56875/8*1
	=	7,109
	Carrying value of Patent as on 31 Dec 2020	49,766
2	Second patent value	80,000
	Rem life	14 years
	Amortization
	=	80000/14*1
	=	5,714
	Carrying value of Patent as on 31 Dec 2020	74,286
3	Carrying value of Trademark as on 31 dec 2020	8,000
	(Value remain same)
4	The fair value of Net identifiable assets	120,000
	Less- Cash paid	117,000
	Goodwill(Bal. figure)	3,000
a	Carrying value as on 31 Dec 2020
	Patent	49,766
	Second patent	74,286
	Trademark	8,000
	Goodwill	3,000
b	Amortisation exp for 2020
	= 7109+5714	12,823
	(calculated earlier)