1. The remaining amortization period for the patent is 8 years (10 years total life - 2 years already passed). Since the economic benefits of the patent will only last 6 years from the date of acquisition, the remaining useful life of the patent is 6 years. The annual amortization expense is $150,000 ($1,500,000 / 10 years). Therefore, the accumulated amortization at December 31, 2015 is $450,000 (3 years x $150,000). The carrying value of the patent, net of accumulated amortization, at December 31, 2015 is $1,050,000 ($1,500,000 - $450,000).
2. The research and development costs that should be recorded as a charge to expense in 2023 are ¥46,000,000. This includes the research and development costs of ¥40,000,000 plus ¥6,000,000 of materials and supplies consumed. The compensation paid to research consultants of ¥12,500,000 is part of the development phase costs and should not be expensed until the product becomes economically viable.
3. The impairment loss should be calculated as the carrying value of the patent (€5,000,000) minus the recoverable amount based on value-in-use (€2,000,000), which is €3,000,000.
Impairment loss = Carrying value - Recoverable amount
Impairment loss = €5,000,000 - €2,000,000
Impairment loss = €3,000,000
4. The impairment loss for the broadcast license should be calculated as the carrying value of the license (€2,000,000) minus the recoverable amount (€1,500,000).
Impairment loss = Carrying value - Recoverable amount
Impairment loss = €2,000,000 - €1,500,000
Impairment loss = €500,000
1. Palmiero purchased a patent from Vania Co. for $1,500,000 on January 1, 2013. The patent is being amortized over its remaining legal life of 10 years, expiring on January 1, 2023. During 2015, Palmiero determined that the economic benefits of the patent would not last longer than 6 years from the date of acquisition. What amount should be reported in the statement of financial position for the patent, net of accumulated amortization, at December 31, 2015? 2. In 2022, Jackie Chan Corporation developed a new product that will be marketed in 2024. In connection with the development of this product, the following costs were incurred in 2023: research and development costs ¥40,000,000; materials and supplies consumed ¥6,000,000; and compensation paid to research consultants ¥12,500,000. (¥23,000,000 of the development phase costs were incurred after the product became economically viable.) It is anticipated that these costs will be recovered in 2026. What is the amount of research and development costs that Chan should record in 2023 as a charge to expense? 3. Lerch SE has a patent on how to extract oil from shale rock, with a carrying value of €5,000,000 at the end of 2018. Unfortunately, several recent non-shale-oil discoveries adversely affected the demand for shale-oil technology, indicating that the patent is impaired. Lerch determines the recoverable amount for the patent, based on value-in-use (because there is no active market for the patent). Lerch estimates the patent’s value-in�use at €2,000,000, based on the discounted expected net future cash flows at its market rate of interest. Required: Calculate the impairment loss? 4. Arcon Radio purchased a broadcast license for €2,000,000. The license is renewable every 10 years. Arcon Radio has renewed the license with the GCC twice, at a minimal cost. Because it expects cash flows to last indefinitely, Arcon reports the license as an indefinite-life intangible asset. Recently, the GCC decided to auction these licenses to the highest bidder instead of renewing them. Based on recent auctions of similar licenses, Arcon Radio estimates the fair value less costs to sell (the recoverable amount) of its license to be €1,500,000. Required: Calculate the impairment loss?
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