Question

Martinez Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Martinez does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Martinez patent number 758-6002-1A is as follows.

Date		Activity		Cost
2011–2012		Research conducted to develop precipitator		$382,000
Jan. 2013		Design and construction of a prototype		85,400
March 2013		Testing of models		57,400
Jan. 2014		Fees paid engineers and lawyers to prepare patent application;
		patent granted June 30, 2014		66,300
Nov. 2015		Engineering activity necessary to advance the design of the
		precipitator to the manufacturing stage		95,000
Dec. 2016		Legal fees paid to successfully defend precipitator patent		57,400
April 2017		Research aimed at modifying the design of the patented precipitator		58,400
July 2021		Legal fees paid in unsuccessful patent infringement suit against a
		competitor		36,000

Martinez assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2019, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.

Compute the carrying value of patent No. 758-6002-1A on each of the following dates:

(a)		December 31, 2014		$
(b)		December 31, 2018		$
(c)		December 31, 2021		$

Answer 1

and Answer: (a) Carrying value of patent on December 31, 2014! | Particulary Amount | Cost to obtain the patent $ 66,300 Amortization of 2014 (66,300/17 years) $ 3,900) Carrying value $ 62400 | All costs incurred prior to January 2014 are related to research development activities and were expensted oy Incurred. (6) the carrying value of patent on December 31, 2018: particulars Amount carrying value on January 1, 2015 $62,400 Amortization of 2015 66,300/17 years)63900) Amortizalion of 2016 (66,300/17 years) ($3900) Legal fee to defend $57400 Total $112,000 Amortization of 2017 (112,000/14 years) $ 8000) Amortization of 2018 (112000/14 years) $ 8000) Carrying value 396000 All cost incurred in 2015 and 2017 are related to research and development activities and were expensed as incurred. C) the carrying value of patent on December 31, 2021: T particulars Amount I carrying value on January 01, 2019 $96,000 Amortization of 2019(96000/5 years) ($19200) Amortization of 2020 (96000/5yeary) 1819200) Ancoltization of 1021(96000/5 yeary) 19200) Carrying value 1$ 38,400 | The legal colg in 2021 were expensed because Suit was unsuccesful.