Question $33$

$10$ pts

During $2024,$ Burks Corporation spent $$510,000$ in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on May $1,2025,$ and had a useful life of $10$ years, and a legal life of $15$ years. Legal costs of $$60,000$ related to the patent were incurred as of May $1,2025.$

Instructions

a$.$ Prepare all journal entries required in $2025$ and $2026$ as a result of the transactions above.

b$.$ On July $15,2027,$ Burks spent $$25,250$ to successfully prosecute a patent infringement. As a result, the estimate of useful life was extended to another $10$ years from July $15,2027.$ Prepare all journal entries required in $2027$ and $2028.$

c$.$ In $2029,$ Burks determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December $31,2030.$ Prepare all journal entries required in $2029$ and $2030.$

Extra credit:

b$\mathrm{.}1.$ What is the accounting treatment for the following scenario? At the year end of $2028,$ the rising of potential competition renders the fair value of the patent to drop to $$60,000.$ The expected future net cash flows due to the patent is estimated to be $67,200.$

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Question $33$

$10$ pts

During $2024,$ Burks Corporation spent $$510,000$ in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on May $1,2025,$ and had a useful life of $10$ years, and a legal life of $15$ years. Legal costs of $$60,000$ related to the patent were incurred as of May $1,2025.$

Instructions

a$.$ Prepare all journal entries required in $2025$ and $2026$ as a result of the transactions above.

b$.$ On July $15,2027,$ Burks spent $$25,250$ to successfully prosecute a patent infringement. As a result, the estimate of useful life was extended to another $10$ years from July $15,2027.$ Prepare all journal entries required in $2027$ and $2028.$

c$.$ In $2029,$ Burks determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December $31,2030.$ Prepare all journal entries required in $2029$ and $2030.$

Extra credit:

b$\mathrm{.}1.$ What is the accounting treatment for the following scenario? At the year end of $2028,$ the rising of potential competition renders the fair value of the patent to drop to $$60,000.$ The expected future net cash flows due to the patent is estimated to be $67,200.$

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