Question

Bluestone Company had three intangible assets at the end of the current year: a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $6,000. When purchased, the patent had an estimated life of 12 years. b. A trademark was registered with the federal government for $4,000. Management estimated that the trademark could be worth as much as $120,000 because it has an indefinite life. c. Computer licensing rights were purchased this year on January 1 for $42,000. The rights are expected to have a six-year useful life to the company.

Answer 1

Answer:

Acquisition cost

a. Patent: $6,000

b. Trademark: $4,000

c. Computer licensing rights: $42,000

2. Amortization for current year

a. Patent: $500

Annual Amortization charge = Cost / Estimated life = $6,000 / 12 = $500

b. Trademark: $0. Since it has an indefinite life.

c. Computer licensing rights: $7,000

Annual Amortization charge = Cost / Useful life = $42,000 / 6 = $7,000

3. Balance Sheet (Partial)

Assets  

Intangible Assets=$44,500

($6,000 + $4,000 + $42,000 - $500 - $7,000)

Income Statement (Partial)

Under Continuing operations  

Amortization expense=$7,500