Cloud Nine Corp. has maintained a research and development department to develop new “know-how” that the company patents from time to time. Moreover, the company also purchases patents. The following is a summary of transactions involving patents owned by the company. 

a. During 2008 and 2009, Cloud Nine Corp. spent a total of P418,000 and P520,000, respectively, in developing a new process that was patented (PATENT ABC) on April 1, 2010; additional legal and other costs in registering the patent amounting to P100,000 were incurred. 

b. Another patent (PATENT DEF) was developed by Lucky Seven Corp. and was purchased by the company for P375,000 on December 31, 2011. The remaining legal life of the patent on the acquisition date was 12 1/2 years. 

c. In 2010, 2011, and 2012, research and development activities cost P125,000, P450,000, and P500,000, respectively were incurred. No additional patents resulted from these activities. 

d. A patent infringement suit brought by the company against a competitor regarding PATENT DEF was successfully prosecuted at a cost of P42,600 in 2012. 

e. On July 1, 2013, PATENT GHI was acquired in exchange for a piece of equipment having a fair value of P300,000. The company paid additional cash in the exchange for P50,000. The carrying value of the equipment on July 1, was P380,000. This patent is estimated to be useful for 16 years. f. During 2014, the company expended P360,000 on patent development. The company however is still undecided as to how the patent will generate probable future economic benefits. Requirements:

1. What is the total expense related to the patents to be recognized for each year from 2008 to 2014?

2. What is the total carrying value of Cloud Nine patents on December 31, 2014?

Answer rating: 100% (QA)

1 2008 418000 2009 520000 2010 128750 2011 455000 2012 577600 2013 45938 2014 416875 2 680938 Stepby... View the full answer