Ask Question
3 April, 20:19

X Company purchased a patent on January 3, year 7 from Y Company for $145,000. An attorney drew up the contract between X & Y at a total cost of $15,000, which was split equally by the parties. The patent had a carrying value of $90,000 on Y's books. X expects to be able to benefit from the patent for 10 years, after which it is expected to be of little to no value. What will be the carrying value of the patent on X Company's December 31, year 8 balance sheet?

+2
Answers (1)
  1. 3 April, 20:21
    0
    The carrying value of the patent on X company on December 31 is $122,000

    Explanation:

    Computing the carrying value of the patent is as:

    The total cost of the patent which will be recognized is as:

    Total cost of patent = Purchased cost + Attorney value

    where

    Purchase cost is $145,000

    Attorney cost will be divided into 2, so

    Attorney cost = $15,000 / 2

    = $7,500

    So,

    Total cost of patent = $145,000 + $7,500

    Total cost of patent = $152,500

    Now, amortize the patent over the useful life of patent as:

    Amortize value = Patent cost / Useful life

    Amortize value = $152,500 / 10

    Amortize value = $15,250

    But X held the patent for 2 years, so its accumulated amortization is:

    Accumulated amortization = Amortize value * 2

    = $15,250 * 2

    Accumulated amortization = $30,500

    Now, the carrying value will be:

    Carrying value = Total cost of patent - Accumulated depreciation

    Carrying value = $152,500 - $30,500

    Carrying value = $122,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “X Company purchased a patent on January 3, year 7 from Y Company for $145,000. An attorney drew up the contract between X & Y at a total ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers