Fields 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:

2006-2007

Research conducted to develop precipitator

$384,000

Jan. 2008

Design and construction of a prototype

87,600

March 2008

Testing of models

42,000

Jan. 2009

Fees paid engineers and lawyers to prepare patent application; patent granted June 30, 2009

80,000

Nov. 2010

Engineering activity necessary to advance the design of the precipitator to the manufacturing stage

81,500

Dec. 2011

Legal fees paid to successfully defend precipitator patent

42,330

April 2012

Research aimed at modifying the design of the patented precipitator

50,000

July 2016

Legal fees paid in unsuccessful patent infringement suit against a competitor

34,000

Fields assumed a useful life of

20

years when it received the initial precipitator

patent. On January 1, 2014, it revised its useful life estimate downward to

6

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.

Instructions:

(a) Compute the carrying value of patent No. 758-6002-1A on December 31, 2009.

Costs to obtain patent Jan. 2009

2009 amortization

Carrying value, 12/31/09

(b) Compute the carrying value of patent No. 758-6002-1A on December 31, 2013.

Carrying value of patent, Jan. 1, 2010

Carrying value, Dec. 31, 2013

(c) Compute the carrying value of patent No. 758-6002-1A on December 31, 2016.

Carrying value Jan 1, 2014

Carrying value, Dec 31, 2016