On January 1, 2019, Josey Corp. received approval for a patent from the Patent Office.

Legal costs incurred were $25,000. On June 30, 2020, Josey incurred further legal costs of $35,000 to defend its patent against a competitor trying to sell a knock-off product. The court action was successful. The patent has a life of twenty years.

Required:

a. What are the variables to consider in determining the useful life of a patent?

b. Calculate the carrying value of the patent as at December 31, 2019, and December 31, 2020.

c. Calculate the carrying value of the patent as at December 31, 2020, if management decides on January 1, 2020 that the patent’s life is only fifteen years from the approval date.

d. What are the accounting treatment and the issues if the patent was assessed to have an indefinite life?