A is corrent. Per ASC Topic 730, all research and development (R&D) costs must be expensed in the period in which they are incurred, because it is difficult to associate these costs with particular achievements and to identify the amount of future benefits and the time period over which those benefits will be realized. Therefore, the R&D costs of $136,000 would be expensed, and the patent would be recorded at the direct cost of acquiring it ($34,000) on 7/1/Y1. At 12/31/Y1, amortization would be recorded for 6 months (7/1 to 12/31) based on the estimated economic life of 10 years. The legal life of 17 years is not used because the patent will provide future benefits to Jase for only 10 years. Therefore, year 1 amortization is $1,700 ($34,000 × 1/10 × 6/12) and the 12/31/Y1 net book value of the patent is $32,300 ($34,000 – $1,700).
B is incorrect. Per ASC Topic 730, all research and development (R&D) costs must be expensed in the period in which they are incurred, because it is difficult to associate these costs with particular achievements and to identify the amount of future benefits and the time period over which those benefits will be realized. Therefore, the R&D costs of $136,000 would be expensed, and the patent would be recorded at the direct cost of acquiring it ($34,000) on 7/1/Y1. At 12/31/Y1, amortization would be recorded for 6 months (7/1 to 12/31) based on the estimated economic life of 10 years. The legal life of 17 years is not used because the patent will provide future benefits to Jase for only 10 years. Therefore, year 1 amortization is $1,700 ($34,000 × 1/10 × 6/12) and the 12/31/Y1 net book value of the patent is $32,300 ($34,000 – $1,700).
B is incorrect. Per ASC Topic 730, all research and development (R&D) costs must be expensed in the period in which they are incurred, because it is difficult to associate these costs with particular achievements and to identify the amount of future benefits and the time period over which those benefits will be realized. Therefore, the R&D costs of $136,000 would be expensed, and the patent would be recorded at the direct cost of acquiring it ($34,000) on 7/1/Y1. At 12/31/Y1, amortization would be recorded for 6 months (7/1 to 12/31) based on the estimated economic life of 10 years. The legal life of 17 years is not used because the patent will provide future benefits to Jase for only 10 years. Therefore, year 1 amortization is $1,700 ($34,000 × 1/10 × 6/12) and the 12/31/Y1 net book value of the patent is $32,300 ($34,000 – $1,700).
D is incorrect. Per ASC Topic 730, all research and development (R&D) costs must be expensed in the period in which they are incurred, because it is difficult to associate these costs with particular achievements and to identify the amount of future benefits and the time period over which those benefits will be realized. Therefore, the R&D costs of $136,000 would be expensed, and the patent would be recorded at the direct cost of acquiring it ($34,000) on 7/1/Y1. At 12/31/Y1, amortization would be recorded for 6 months (7/1 to 12/31) based on the estimated economic life of 10 years. The legal life of 17 years is not used because the patent will provide future benefits to Jase for only 10 years. Therefore, year 1 amortization is $1,700 ($34,000 × 1/10 × 6/12) and the 12/31/Y1 net book value of the patent is $32,300 ($34,000 – $1,700).
|
