On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is $1,250,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs: $25,000 in legal fees associated with the purchase and filing of the patent, $40,000 to advertise its new laser surgery techniques, and $ 50,000 to train employees. None of these additional costs were included in the purchase price or paid to the seller. What is the recorded cost of the patent?
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- For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A. A patent with a seventeen-year remaining legal life was purchased for $850,000. The patent will be usable for another six years. B. A patent was acquired on a new tablet. The cost of the patent itself was only $12,000, but the market value of the patent is $150,000. The company expects to be able to use this patent for all twenty years of its life.Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a life of twenty years, but Calico expects to be able to sell the drug for fifty years. Calculate the amortization expense and record the journal for the first years expense.On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is $1,220,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs: $22,000 in legal fees associated with the purchase and filing of the patent, $37,000 to advertise its new laser surgery techniques, and $47,000 to train employees. None of these additional costs were included in the purchase price or paid to the seller. Now assume that instead of purchasing the patent, Advanced Technologies spent $1,220,000 to develop the patent internally, consisting of personnel ($810,000), equipment ($306,000), and materials ($104,000). All additional costs were incurred for the same amount. What is the recorded cost of the patent? total capitalized cost=
- On March 17, Advanced Technologies purchased a patent related to laser surgery techniques. The purchase price of the patent is $1,340,000. The patent is expected to benefit the company for the next five years. The company had the following additional costs: $34,000 in legal fees associated with the purchase and filling of the patent, $49,000 to advertise its new laser surgery techniques, and $59,000 to train employees. None of these additional costs were included in the purchase price or paid to the seller. Now assume that instead of purchasing the patent, Advanced Technologies spent $1,340,000 to develop the patent internally, consisting of personnel ($870,000), equipment ($342,000), and materials ($128,000). All additional costs were incurred for the same amount. What is the recorded cost of the patent? Total capitalized costAs a result of improvements in product engineering, United Automation is able to sell one of its two milling machines. Both machines perform the same function but differ in age. The newer machine could be sold today for $68,000. Its operating costs are $22,400 a year, but at the end of five years, the machine will require a $18,800 overhaul (which is tax deductible). Thereafter, operating costs will be $31,200 until the machine is finally sold in year 10 for $6,800. The older machine could be sold today for $26,200. If it is kept, it will need an immediate $26,000 (tax-deductible) overhaul. Thereafter, operating costs will be $35,000 a year until the machine is finally sold in year 5 for $6,800. Both machines are fully depreciated for tax purposes. The company pays tax at 21%. Cash flows have been forecasted in real terms. The real cost of capital is 14%. a. Calculate the equivalent annual costs for selling the new machine and for selling the old machine. (Do not round intermediate…As a result of improvements in product engineering, United Automation is able to sell one of its two milling machines. Both machines perform the same function but differ in age. The newer machine could be sold today for $56,000. Its operating costs are $20,800 a year, but at the end of five years, the machine will require a $19,600 overhaul (which is tax deductible). Thereafter, operating costs will be $30,400 until the machine is finally sold in year 10 for $5,600. The older machine could be sold today for $25,400. If it is kept, it will need an immediate $22,000 (tax-deductible) overhaul. Thereafter, operating costs will be $31,900 a year until the machine is finally sold in year 5 for $5,600. Both machines are fully depreciated for tax purposes. The company pays tax at 21%. Cash flows have been forecasted in real terms. The real cost of capital is 8%. a. Calculate the equivalent annual costs for selling the new machine and for selling the old machine. (Do not round intermediate…
- Simon Machine Tools Company is considering the purchase of a new set ofmachine tools to process special orders over the next three years. The following financial information is available:1. Without the project, the company expects to have a taxable income of$400,000 each year from its regular business over the next three years. 2. This three-year project requires the purchase of a new set of machine tools at a cost of $50,000. The equipment falls into the MACRS three-year class. The tools will be sold at the end of the project life for $10,000. The project will bring in additional annual revenue of $90,000, but it is expected to incur additional annual operating costs of $25,000.(a) What are the additional taxable incomes (from undertaking the project)during years 1 through 3, respectively?(b) What arc the additional income taxes (from undertaking the new orders) during years 1 through 3, respectively?On March 17, Advanced Technologies developed a patent related to laser surgery techniques. They spent $1,200,000 to develop the patent internally, consisting of personnel ($800,000), equipment ($300,000), and materials ($100,000). The company also had the following additional costs: $20,000 in legal fees associated with the purchase and filing of the patent, $35,000 to advertise its new laser surgery techniques, and $45,000 to train employees. What is the recorded cost of the patent?Ovida company clinches a contract to supply cleaning services to a nursing home for the next 5 years. Under the contract, the company will be paid $1 million a year. To take up this contract, it would have to invest in new cleaning equipment costing $600,000 which will be depreciated straight-line to zero over 5 years. there is no salvage value at the end of 5 years. labour costs will be $300,000 per year and overheads $250,000 per year. the company will need to invest in net working capital of $350,000. it plans to issue $1 million worth of bonds for the next 5 years at a coupon rate of 6% and will price bonds at par. the company has an existing bank loan of $9 million. the cost of debt from a bank loan is the same as the bonds. the common stock of the company is selling for $10 per share and it has 2 million shares outstanding. expected dividend next year is $1 per share and dividends are expected to grow at 2% per annum. the tax rate is 20%. (a) compute the cost of equity b)…
- In January 2014, the Jennifer Corporation purchased a patent for $231,000 from Travis Company that had a remaining legal life of 14 years. Jennifer estimated that the remaining economic life would be seven years. In January 2018, the company incurred $30,000 in legal costs to defend the patent from an infringement. Jennifer's lawyers were successful, and the remaining years of benefit from the patent were estimated to be six years. What is the patent amortization expense for 2018? $9,923 $21,500 $7,615 $16,500K&G Chemical Company has just received a special subcontracting job from one of its clients. This two-year project requires the purchase of a special-purpose painting sprayer for $60,000. This equipment falls into the MACRS five-year class. After the subcontracting work is completed at the end of two years, the painting sprayer will be sold for $40,000 (actual dollars). The painting system will require an increase in the company's networking capital (for spare-parts inventory, such as spray nozzles) of $5,000. This investment in working capital will be fully recovered at the project termination. The project will bring in additional annual revenue of $120,000 (today's dollars), but it is expected to incur an additional annual operating cost of $60,000 (today's dollars). It is projected that, because of inflation, there will be sales-price increases at an annual rate of 5%, which implies that annual revenues will also increase at an annual rate of 5%. Anannual increase of 4% for…Gentry Machines. Inc .. has just received a special job order from one of itsclients. The following financial data on the order have been collected: This two-year project requires the purchase of a special-purpose piece of equipment for $55,000. The equipment falls into the MACRS five-year class. The machine will be sold at the end of two years for $27,000 (today's dollars). The project will bring in additional annual revenue of $114,000 (actual dollars), but it is expected to incur an additional annual operating cost of $53,800 (today's dollars). To purchase the equipment, the firm expects to borrow $50,000 at 10% over a two-year period (equal annual payments of $28,810 in actual dollars). The remaining $5,000 will be taken from the firm's retained earnings. The firm expects general inflation of 5% per year during the project period. The firm's marginal tax rate is 40%, and its market interest rate is 18%.(a) Compute the after-tax cash flows in actual dollars.(b) Whal is the…