Fields does not manufacture or sell the products and

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precipitator that prevents certain types of air pollution. Fields 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 Fields patent number 758-6002-1A is as follows. Fees paid engineers and lawyers to prepare patent application; patent granted June 30, 2006 Engineering activity necessary to advance the design of the precipitator to the manufacturing stage Legal fees paid to successfully defend precipitator patent Research aimed at modifying the design of the patented precipitator Legal fees paid in unsuccessful patent infringement suit against a competitor 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. (a) Compute the carrying value of patent No. 758-6002-1A on December 31, 2006. All costs incurred prior to January 2006 are related to research and development activities and were expensed as incurred in accordance with GAAP.
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f7f8505e39106437fcb7f881fe478315e3671618.xlsx, Problem 12-2 Solution, Page 8 of 12, 03/03/2016, 09:54:15 Name: Solution Date: Instructor: Course: Carrying value of patent, Jan. 1, 2007 $56,000 Amortization 2007 3,500 Amortization 2008 3,500 (7,000) 49,000 Legal fees to defend patent Dec. 2008 42,000 Carrying value, Dec. 31, 2008 91,000 Amortization 2009 6,500 Amortization 2010 6,500 (13,000) Carrying value, Dec. 31, 2010 $78,000 Carrying value Jan 1, 2011 $78,000 Amortization 2011 ($78,000 / 5 years) $15,600 Amortization 2012 15,600 Amortization 2013 15,600 (46,800) Carrying value, Dec 31, 2013 $31,200 The legal costs in 2013 were expensed because the suit was unsuccessful. (b) Compute the carrying value of patent No. 758-6002-1A on December 31, 2010. The costs incurred in 2007 and 2009 are related to research and development activities and are expensed as incurred. (c) Compute the carrying value of patent No. 758-6002-1A on December 31, 2013.
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f7f8505e39106437fcb7f881fe478315e3671618.xlsx, Problem 12-2, Page 9 of 12, 03/03/2016, 09:54:15 Name: Date: Instructor: Course: Date: Activity: Cost: 2003-2004 Research conducted to develop precipitator $384,000 Jan. 2005 Design and construction of a prototype 87,600 March 2005 Testing of models 42,000 Jan. 2006 59,500 Nov. 2007 81,500 Dec. 2008 42,000 April 2009 43,000 July 2013 34,000 Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2011, it revised its useful life estimate downward to 5 Instructions: Costs to obtain patent Jan. 2006 Amount Text title Amount Text title Formula Intermediate Accounting , 14 th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P12-2 (Accounting for Patents) Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields 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.
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