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Orange Corporation does the following in 2016: Purchases a patent from Greene Corporation for $250,000 on June 1.

Orange Corporation does the following in 2016:


1. Purchases a patent from Greene Corporation for $250,000 on June 1. Orange Corporation incurs an additional $18,000 in legal costs and $5,250 in registration costs on the same date. The patent has an existing legal life of 14 years but Orange Corporation believes it will be useful for 6 years from the date of purchase before new innovations cause the technology to become obsolete. Denote this patent as Patent 1.

2. Orange creates a customer list of individuals who have visited their website 5 times in the last year on July 1. They will use this listing in the future to generate business. They believe that this mailing list has a value of $75,000 considering the time and effort that went into creating the listing.

3. Orange also developed a new process which they patented. They spend $180,000 in research costs and another $228,000 in development costs up to August 1, before patenting the process. They incurred an additional $28,000 in legal costs and $12,000 in registration costs on August 1 in order to file an application to register the patent in 2016. The patent has a legal life of 20 years but the company believes that they will be able to generate revenue for only 10 years before new innovations make their process obsolete. Denote this patent as Patent 2.

4. Orange also purchased a brand name from another company at a cost of $250,000 on September 8, 2016. The company has the exclusive right to use this name in perpetuity.

5. The company is thinking of buying the copyright to a song that they could use to advertise their products. They would like to know, if they bought the exclusive copyright to the song, what would be the IFRS requirements with regards to the copyright. The asking price for the copyright is $430,000. 


Required:

1. Why does IFRS differentiate between research and development costs? What are the criteria that would allow the company to capitalize internally generated intangibles?

2. Record all the necessary entries for Orange Corporation in 2016. The company has a December 31 year end.

3.Orange Corporation, in 2017, filed a lawsuit against another company for patent infringement with regards to Patent 2. On August 1, 2017, they win the lawsuit. They pay their lawyers $32,000 on that date. 

a) Record all the necessary entries for 2017

b) Provide the entry for amortization for 2018.

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