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Chapter 12: 12-9Q (page 637)

Romo Company spent \(190,000 developing a new process, \)45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2017. How should these costs be accounted for in 2017?

Short Answer

Expert verified

The $45,000 cost of obtaining the patent legitimately should be capitalized and amortized throughout the invention鈥檚 useful or legal life, whichever is shorter.

Step by step solution

01

Meaning of patent

A patent is a legal right granted to a person or company to reproduce, use, or sell an invention without the interference of others.

02

Accounting of Costs

In 2017, the $190,000 should be deducted as a research and development expense.

In 2017, the $91,000 will be deducted as selling and promotion expenditure.

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Most popular questions from this chapter

Question: Nieland Industries had one patent recorded on its books as of January 1, 2017. This patent had a book value of \(288,000 and a remaining useful life of 8 years. During 2017, Nieland incurred research and development costs of \)96,000 and brought a patent infringement suit against a competitor. On December 1, 2017, 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, 2017, balance sheet, assuming monthly amortization of patents?

The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.

Where on the asset side of the balance sheet are debt investments classified as trading securities, available-for-sale securities, and held-to-maturity securities reported? Explain.

What should be the pattern of amortization for a limited-life intangible?

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