Various Intangible Assets (Alternative is 8-53.) Consider the following: 1. On December 29, 2000, Sony Corporation purchased
Question:
Various Intangible Assets (Alternative is 8-53.) Consider the following: 1. On December 29, 2000, Sony Corporation purchased a patent on some broadcasting equipment for $800,000. The patent has 16 years of its legal life remaining. Because technology moves rapidly, Sony expects the patent to be worthless at the end of 5 years. What is the amortization for 2001?
2.
(a) Amgen, a biotech firm with almost $5 billion in revenues, spent more than $1,000 million in its research departments in 2002. These expenditures resulted in valuable new patents.
(b) Suppose that in December 2002, Amgen had paid $1,000 million to various outside companies for the same new patents. How would alternatives
(a) and
(b) affect Amgen's income statement for the year ended December 31, 2002? How would they affect Amgen's balance sheet on December 31, 2002? 3. IBM included $834 million of software in its "Investments and Sundry Assets" account on its 2002 balance sheet. The notes indicated that "Costs that are related to the conceptual formulation and design of licensed programs are expensed as R&D... the company capitalizes costs that are incurred to produce the finished product after technological feasibility is established. The annual amortization of the capitalized amounts is performed using the straight-line method and is applied over periods ranging up to three years." Suppose that IBM spends the same amount on this activity every year and that it amortizes all such software over 3 years on a straight-line basis. How would the income statement and balance sheet change if IBM changed the maximum term to 4 years and then amortized every dollar of capitalized software over 4 years?
Step by Step Answer:
Introduction To Financial Accounting
ISBN: 0131479725
9th Edition
Authors: Charles T Horngren, John A Elliott