Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 12: 12-9Q (page 637)

Romo Company spent \(190,000 developing a new process, \)45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2017. How should these costs be accounted for in 2017?

Short Answer

Expert verified

The $45,000 cost of obtaining the patent legitimately should be capitalized and amortized throughout the invention’s useful or legal life, whichever is shorter.

Step by step solution

01

Meaning of patent

A patent is a legal right granted to a person or company to reproduce, use, or sell an invention without the interference of others.

02

Accounting of Costs

In 2017, the $190,000 should be deducted as a research and development expense.

In 2017, the $91,000 will be deducted as selling and promotion expenditure.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What are the main distinctions between a traditional financial instrument and a derivative financial instrument?

Question: Why are held-to-maturity investments applicable only to debt securities?

Presented below is selected information related to Martin Burke Inc. at year-end. All these accounts have debit balances.

Cable television franchises

Film contract rights

Music copyrights

Customer lists

Research and development costs

Prepaid expenses

Goodwill

Covenants not to compete

Cash

Brand names

Discount on notes payable

Notes receivable

Accounts receivable

Investments in affiliated companies

Property, plant, and equipment

Organization costs

Internet domain name

Land

Instructions:

Identify which items should be classified as an intangible asset. For those items not classified as an intangible asset, indicate where they would be reported in the financial statements.

Under what circumstances is it appropriate to record goodwill in the accounts? How should goodwill, properly recorded on the books, be written off in order to conform with generally accepted accounting principles?

Joni Hyde Inc. has the following amounts reported in its general ledger at the end of the current year.

Organization costs $24,000

Trademarks 15,000

Discount on bonds payable 35,000

Deposits with advertising agency for ads to promote goodwill of company 10,000

Excess of cost over fair value of net identifiable assets of acquired subsidiary 75,000

Cost of equipment acquired for research and development projects; the equipment has an alternative future use 90,000

Costs of developing a secret formula for a product that is expected to be marketed for at least 20 years 80,000

Instructions

(a) On the basis of the information above, compute the total amount to be reported by Hyde for intangible assets on its balance sheet at year-end.

(b) If an item is not to be included in intangible assets, explain its proper treatment for reporting purposes.
See all solutions

Recommended explanations on Business Studies Textbooks

Strategic Analysis

Read Explanation

Managerial Economics

Read Explanation

Financial Performance

Read Explanation

Managers

Read Explanation

Business Operations

Read Explanation

Organizational Behavior

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free