During 2012, Haslem, Inc., invested $105,000 to successfully develop a new product, and a patent was granted on December 31, 2012. Haslem incurred $22,000 of legal fees and $1,200 of registration fees to secure the patent. Haslem estimates that the patent will have a useful life of 10 years and no salvage value. On January 1, 2015, Haslem's major competitor announced that it had developed a similar product, which reduced the value of Haslem's patent to $12,000. Haslem considers the loss in value permanent. Haslem has a December 31 year-end.
a. What amount should be recorded as the cost of the patent? How are the remaining costs treated for financial reporting purposes?
b. Compute amortization expense for the patent for years 2013 and 2014 and prepare the appropriate journal entries.
c. What should Haslem do on January 1, 2015, if anything?

  • CreatedJuly 16, 2015
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