Intangible Asset Paper 2

1

Gray Co. was granted a patent on January 2, Year 5, and appropriately capitalized $45,000 of related costs. Gray was amortizing the patent over its estimated useful life of 15 years. During Year 8, Gray paid $15,000 in legal costs in successfully defending an attempted infringement of the patent. After the legal action was completed, Gray sold the patent to the plaintiff for $75,000. Gray’s policy is to take no amortization in the year of disposal. In its Year 8 income statement, what amount should Gray report as gain from sale of patent?






2

Which of the following assets, if any, acquired this year in an exchange transaction is(are) potentially amortizable? Goodwill Trademarks






3

Goodwill should be tested for value impairment at which of the following levels?






4

A company should recognize goodwill in its balance sheet at which of the following points?






5

On December 31, year 3, Byte Co. had capitalized software costs of $600,000 with an economic life of four years. Sales for year 4 were 10% of expected total sales of the software. At December 31, year 4, the software had a net realizable value of $480,000. In its December 31, year 4 balance sheet, what amount should Byte report as net capitalized cost of computer software?






6

On January 2, year 4, Judd Co. bought a trademark from Krug Co. for $500,000. Judd retained an independent consultant, who estimated the trademark’s remaining life to be fifty years. Its unamortized cost on Krug’s accounting records was $380,000. In Judd’s December 31, year 4 balance sheet, what amount should be reported as accumulated amortization?






7

On January 2, year 4, Paye Co. purchased Shef Co. at a cost that resulted in recognition of goodwill of $200,000. During the first quarter of year 4, Paye spent an additional $80,000 on expenditures designed to maintain goodwill. In its December 31, year 4 balance sheet, what amount should Paye report as goodwill?






8

Northern Airline purchased airline gate rights at Newark International Airport for $2,000,000 with a legal life of five years. However, Northern has the ability and right to extend the rights every ten years for an indefinite period of time. Over what period of time should Northern amortize the gate rights?






9

On January 2, year 1, Lava, Inc. purchased a patent for a new consumer product for $90,000. At the time of purchase, the patent was valid for fifteen years; however, the patent’s useful life was estimated to be only ten years due to the competitive nature of the product. On December 31, year 4, the product was permanently withdrawn from sale under governmental order because of a potential health hazard in the product. What amount should Lava charge against income during year 4, assuming amortization is recorded at the end of each year?






10

What does ASC Topic 350 require with respect to accounting for goodwill?






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