Problem $3$: P$11\mathrm{.}2($LO $1,2,4)($Accounting for Patents$)$ Fields Laboratories holds a valuable patent $($No$.758-6002-1$A$)$ on a precipitator that prevents certain types of air pollution. Fields 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 Fields patent number $758-6002-1$A is as follows.

Date Activity Cost

$20162017$ Research conducted to develop precipitator $$384,000$

Jan. $2018$ Design and construction of a prototype $87,600$

March $2018$ Testing of models $42,000$

Jan. $2019$ Fees paid engineers and lawyers to prepare patent application;

patent granted June $30,201959,500$

Nov. $2020$ Engineering activity necessary to advance the design of the

precipitator to the manufacturing stage $81,500$

Dec. $2021$ Legal fees paid to successfully defend precipitator patent $42,000$

April $2022$ Research aimed at modifying the design of the patented precipitator $43,000$

July $2026$ Legal fees paid in unsuccessful patent infringement suit against a

competitor $34,000$

Fields assumed a useful life of $17$ years when it received the initial precipitator patent. On January $1,2024,$ 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 for the year if the cost is incurred after June $30.$ The company$$s year ends December $31.$

Instructions

a$.$ Prepare the journal entry for each of the above transactions.

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

a$.$ December $31,2019.$

b$.$ December $31,2023.$

c$.$ December $31,2026.$