Answer and Explanation:
The computation is shown below:
1) Calculation of the acquisition cost is
Patent = $4,000
Trademark = $210,000 + $8,500 = $218,500
Licensing Rights = $80,000
2) Computation the amortization expense is
Patent = $4,000 ÷ 10 = $400
Trademark = $218,500 ÷ 10 = $21,850
Here we assume the indefinite life of 10 years
Licensing Rights = $80,000 ÷ 5 = $16,000
3)
Income statement:
Amortization expense $38,250 ($400 + $21,850 + $16,000)
Balance sheet at year end december:
Fixed assets
Intangibles
Patent $3600 ($4,000 - $400)
Trademark $196,650 ($218,500 - $21,850)
Licensing Rights $64,000 ($80,000 - $64,000)
