Question
1) Recharge Ltd. purchased a patent on January 1, 2020, for $ 1,120,000. At the time of the purchase, the patent had a remaining legal
1) Recharge Ltd. purchased a patent on January 1, 2020, for $ 1,120,000. At the time of the purchase, the patent had a remaining legal life of 20 years. In January 2023, Recharge spent $ 92,000 successfully defending the patent in court. One of the other results of the court case was the discovery that the patent would only have a remaining useful life of 9 years. Recharge's year end was December 31.
Required
Prepare the entries on the books of Recharge to record
a.The purchase of the patent.
b.The amortization for the first year (2020)
c.The defence of the patent.
d.Amortization for 2023.
2) B52 Corporation's pre-tax accounting income of $726,000 for the year 2020 included the following items:
Amortization of identifiable intangibles | $140,000 |
Depreciation of building | 119,000 |
Loss from discontinued operations | 46,000 |
Unusual, non-recurring gains | 157,000 |
Profit-sharing payments to employees | 69,300 |
Lush Industries Ltd. would like to purchase B52 Corporation. In trying to measure B52's normalized earnings for 2020, Lush determines that the building's fair value is triple the book value and that its remaining economic life is double the life that B52 is using. Lush would continue the profit-sharing payments to employees, with the payments being based on income from continuing operations before amortization and depreciation.
Required
Calculate the 2020 normalized earnings amount of B52 Corporation that Lush would use to calculate goodwill.
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