1.(Accounting for Patents) During 2008, Burks Corporation spent $510,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2010, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $54,000 related to the patent were incurred as of October 1, 2010. On June 1, 2012, Burks spent $28,440 to successfully prosecute a patent infringement. As a result, the estimate of useful life was extended to 12 years from June 1, 2010. In 2014, Burks determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December 31, 2015.
Instructions
(a) Prepare a workpaper that tracks the asset balance and annual expenses associated with R&D and the patent from 2008 through 2015.
(b) Specify the asset and expense balances you would report in each year.
(c) Write the footnote disclosure you would provide for 2008, 2010, and 2015.