Thomas Industries has the following patents on its December 31, 2014, balance sheet. The following events occurred
Question:
The following events occurred during the year ended December 31, 2015.
1. Research and development costs of $347,000 were incurred during the year.
2. Patent D was purchased on July 1 for $10,800. This patent has a useful life of 12 years.
3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent Bs value may have occurred at December 31, 2015. The controller for Thomas estimates the future cash flows from Patent B will be as follows.
Year Future Cash Flows
2016 ......... $2,500
2017 ......... $2,500
2018 ......... $2,500
The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)
Instructions
(a) Compute the total carrying amount of Thomass patents on its December 31, 2014, balance sheet.
(b) Compute the total carrying amount of Thomass patents on its December 31, 2015, balancesheet.
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield