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1 January, 12:02

Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $288,000 and a remaining useful life of 8 years. During 2014, Nieland incurred research and development costs of $96,000 and brought a patent infringement suit against a competitor. On December 1, 2014, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $85,000 to defend this patent. At what amount should patent (s) be reported on the December 31, 2014, balance sheet, assuming monthly amortization of patents?

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  1. 1 January, 15:57
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    Answer:The patent should be reported at $430870.59

    Explanation:

    Research and development costs and costs incurred to defend the Patent should be capitalized.

    288000/8 = 36000

    Amortization from january to november = 36000 x 11/12 = 33000

    Book value on 1 december 2014 = 288000 - 33000 = 255000

    remaining months = 7 x 12 = 84 + 1 month (december 2014) = 85

    Book Value 1 December = 255000 + 96000 + 85000 = 436000

    Book Value 31 December 2014 = 436000 - 436000/85 = 430870.59

    The patent should be reported at $430870.59
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