Choo Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air

Question:

Choo Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Choo does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally, it sells a patent. The history of Choo’s patent number 758-6002-1A is as follows.


Based on execution of a royalty contract in March 2019, the patent is deemed to be economically viable. Choo assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2021, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization is computed for the year if the cost is incurred after June 30. The company’s year ends December 31. 


Instructions

Compute the carrying value of patent No. 758-6002-1A on each of the following dates:

a. December 31, 2016.

b. December 31, 2020.

c. December 31, 2023.

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Intermediate Accounting IFRS

ISBN: 9781119607519

4th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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