91Ó°ÊÓ

The company's most valuable and intangible assets are patents, which offer unique legal rights to utilize a technique or manufacture and sell a product. The value of patents grows and decreases in tandem with the performance of the firm.

Number of months amortized to date

Carrying amount 12/31/16 = $23,700

Working Notes:

$$\begin{gathered} \text{Carrying}\text{amount}=\text{Initial}\text{cost}-\left(\text{Total}\text{month}×\text{Amortization}\text{per}\text{month}\right) \\ =\$30,600-\left(46×\$150\right) \\ =\$23,700 \end{gathered}$$

Number of months amortized to date

The carrying amount on 12/31/16 is $11,250

Working notes:

$$\begin{gathered} \text{Carrying}\text{amount}=\text{Initial}\text{cost}-\left(\text{Total}\text{month}×\text{Amortization}\text{per}\text{month}\right) \\ =\$15,000-\left(\$125×\$30\right) \\ =\$11,250 \end{gathered}$$

Number of months amortized to date

The carrying amount on 12/31/16 is $9,600

$$\begin{gathered} \text{Carrying}\text{amount}=\text{Initial}\text{cost}-\left(\text{Total}\text{month}×\text{Amortization}\text{per}\text{month}\right) \\ =\$14,400-\left(\$300×\$16\right) \\ =\$9,600 \end{gathered}$$

Analysis of 2017 transactions

1. The $245,700 incurred for research and development should be expensed.
2. The book value of Patent B is $9,750 ($11,250-$1,500) and its estimated future cash flows are $6,000: (3$2,000); therefore, Patent B is impaired. The impairment loss is imputed as follows:

Patent B carrying amount (12/31/17) is $5,154

Working notes:

Calculation of the amount of Patent A

$$\begin{gathered} \text{Patent}\text{A}=\text{Patent}\text{amount}-\left(\text{Month}×\text{Amortization}\text{amount}\right) \\ =\$23,700-\left(12×\$150\right) \\ =\$21,900 \end{gathered}$$

Calculation of the amount of Patent C

$$\begin{gathered} \text{Patent}\text{A}=\text{Patent}\text{amount}-\left(\text{Month}×\text{Amortization}\text{amount}\right) \\ =\$9,600-\left(12×\$300\right) \\ =\$6,000 \end{gathered}$$

Amortization per month value is $1,920