Choo Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Choo 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 Choo’s patent number 758-6002-1A is as follows.

Based on execution of a royalty contract in March 2019, the patent is deemed to be economically viable. Choo assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2021, 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 is computed for the year if the cost is incurred after June 30. The company’s year ends December 31. 

Instructions

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

a. December 31, 2016.

b. December 31, 2020.

c. December 31, 2023.

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Date Activity Cost 2013- Research conducted to develop precipitator HK$384,000 2014 Jan. Design and construction of a prototype 87,600 2015 Mar. Testing of models 42,000 2015 Jan. Fees paid engineers and lawyers to prepare 2016 patent application; patent granted June 30, 2016 59,500 Nov. Engineering activity necessary to advance the 2017 design of the precipitator to the manufacturing stage 81,500 Dec. Legal fees paid to successfully defend 2018 precipitator patent 42,000 Apr. Development costs aimed at modifying the 2019 design of the patented precipitator 49,000 July Legal fees paid in unsuccessful patent 2021 infringement suit against a competitor 34,000