Exercise 12-10 (Part Level Submission) Metlock Industries has the following patents on its December 31, 2016, balance sheet. Useful Life at Date Acquired 17 years 10 years 4 years Date Acquired Patent Item Patent A Patent B Patent C Initial Cost $41,412 $15,360 $15,840 The following events occurred during the year ended December 31, 2017 . Research and development costs of $233,000 were incurred during the year. 2. Patent D was 3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent D\'s value may have occurred at December 31, 2017. The controller for Metlock estimates the on July 1 for $26,904. This patent has a useful life of 9/2 years. expected future cash flows from Patent B will be as follovs. Year 2018 2019 2020 Expected Future Cash Flows $1,950 1,950 1,950 The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year) Your answer is correct. Compute the total carrying amount of Metlock patents on its December 31, 2016, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.) Total carrying amount 541
Patent A :-
Life = 17 years or 204 month
Ammortisation per month = 41412/204 = 203
Carrying value on 31.3.17 = Book Value – Ammortisation of 12 month
Book value = 41412 – (203 * 46 month) = 32074
Carrying Value = 32074 – (12 * 203) = 29638
Patent B:-
Carrying Value = PV of expected future cash flow
PVAF for 3 years @ 8% = 2.57710
Carrying value = 2.57710 * 1950 = 5025
Patent C:-
Life = 4 years or 48 month
Ammortisation per month = 15840/48 = 330
Carrying value on 31.3.17 = Book Value – Ammortisation of 12 month
Book value = 15840 – (330 * 16 month) = 10560
Carrying Value = 10560 – (12 * 330) = 6600
Patent D :-
Life = 9.5 years or 114 month
Ammortisation per month = 26904/114 = 236
Carrying value on 31.3.17 = Initial Value – Ammortisation
Carrying Value = 26904 – (6 * 236) = 25488
Total Carrying Amt = Patent A + B + C + D
29638 + 5025 + 6600 + 25488 = 66751
Homework Sourse
