Sheffield Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.

Date
Activity
Cost
2008–2009 Research conducted to develop precipitator $382,000
Jan. 2010 Design and construction of a prototype 89,000
March 2010 Testing of models 40,600
Jan. 2011 Fees paid engineers and lawyers to prepare patent application;
patent granted June 30, 2011 52,700
Nov. 2012 Engineering activity necessary to advance the design of the
precipitator to the manufacturing stage 84,500
Dec. 2013 Legal fees paid to successfully defend precipitator patent 40,600
April 2014 Research aimed at modifying the design of the patented precipitator 41,600
July 2018 Legal fees paid in unsuccessful patent infringement suit against a
competitor 36,000

Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2016, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.

Compute the carrying value of patent No. 758-6002-1A on each of the following dates:

(a) December 31, 2011
$
(b) December 31, 2015
$
(c) December 31, 2018
$

                        SHEFFIELD LABORATORY

                            PATENT (NO. 78-6002-1A)

Carrying value as at Dec 31

                                      2011                     2015                   2018

Cost                            $182,300           $349,000           $385,000

Amortization             (10,724)               (79,433)             (142,403)

                                  171,576               269,567             242,597

Cost

As at 31 Dec 2011

Design and construction of a prototype                                     $89,000

Testing of models                                                                           40,600

Fees paid engineers and lawyers to prepare application           52,700

                                                                                                       $182,300

As at 31 Dec 2012

Cost as at Jan 1, 2012                                                                $182,300

Additional cost during the year:

Engineering activity necessary to advance.                           $84,500  

                                                                                                    $266,800

As at 31 Dec 2013

Cost as at Jan 1, 2013                                                                $266,800

Additional cost during the year:

legal fee paid                                                                              $40600  

                                                                                                    $307,400

As at 31 Dec 2014

Cost as at Jan 1, 2013                                                                $307,400

Additional cost during the year:

Research aimed at modifying the design                                $41,600

                                                                                                    $349,000

As at 31 Dec 2018

Cost as at Jan 1, 2018                                                                $349,000

Additional cost during the year:

legal fee paid in unseccesful patent infrigement.                    $36,000  

                                                                                                    $385,000

Amortization for the year    

Dec 31 2011         $182,300/17 =  $10,724

Dec 31 2012

182,300/17                                          10,724

84,500/0                                                -      

                                                           10,724

Dec 31 , 2013 :

  $182,300/17 =  $10,724            

  84,500/16    =      5,281

40,600/0     =        -  

                            16,005

Dec 31 2014  =  

$182,300/17 =  $10,724            

  84,500/16    =      5,281

40,600/16     =       2,538

41,600/17      =       2,447

                            20,990

Dec 31 2018  =  

$182,300/17 =  $10,724            

  84,500/16    =      5,281

40,600/16     =       2,538

41,600/17      =        2,447

36,000/0     =           -

                            20,990

Explanation:

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