Pinetree Manufacturing Company reports both equipment and patents on its statement of financial position.
Required:
a. Explain how the amount reported on the statement of financial position for each of these types of asset is determined.
b. The equipment and patents were both purchased three years ago for $40,000 each and were estimated to have 10 year useful lives. The equipment is expected to have a residual value of $2,000. The company uses the straight-line method to depreciate its equipment and amortize its patent. Based on this information, what amount would be reported for each of them on the statement of financial position at the end of the current period? Explain.
c. Financial analysts sometimes ignore intangible assets when analyzing financial statements. Do you think this is appropriate? Explain.