Intangible assets

The following information is provided for the operations of the company MB-Veitingar ehf. in the year 2020.

The company MB-Veitingar signed an agreement on 1 January 2020 with a well-known foreign brand for franchise in Iceland. The agreement stipulates that the fee for the concession amounts to a total of ISK 20,000,000. which is divided into five equal installments to be paid at the beginning of each year, each installment in the amount of ISK 4,000,000. The first installment is non-refundable and was paid at the signing of the agreement and MB-Veitingar is not entitled to any services in the future by the concessionaire. The yield on the agreement is 14% annual interest and the management of MB-Veiting estimates that the useful life of the concession is 10 years. MB-Veitingar also has to pay 4% of the total turnover to the concessionaire, but the turnover for the year 2020 amounted to a total of ISK 175,650,000.

MB-Veitingar completed the development of a patent during the year and the patent was granted on 30 November. The total cost of research and development amounts to ISK 25,560,000. but the cost of lawyers' costs and other costs of registering the patent amounted to a total of ISK 2,470,000. It is estimated that the life of the patent is 10 years, but it is not possible to estimate the expected economic benefit in the future (economically viable).

MB-Veitingar bought a patent on 1 July, but the purchase price amounted to a total of ISK 16,400,000. and management estimates that its useful life is 8 years. The company filed a lawsuit against a party who violated the patent and won the case on 1 December. According to the judgment, the defendant shall pay MB-Veitingur ISK 1,700,000. in defense fees. The costs incurred by lawyers in connection with the lawsuit amounted to ISK 2,850,000.

The following needs to be resolved;

a. What is the book value of MB-Veiting's intangible assets at the end of the year divided into each asset separately? Note that all calculations must be shown broken down for each property separately! b. What is the expense in the income statement for intangible assets at the end of the year? Note that all calculations must be shown broken down for each property separately!