Bluestone Company had three intangible assets at the end of the current year: a. A patent purchased this year from Miller Co. on January 1 for a cash cost of $3,200. When purchased, the patent had an estimated life of 16 years.
b. A trademark was registered with the federal government for $7,500. Management estimated that the trademark could be worth as much as $190,000 because it has an indefinite life.
c. Computer licensing rights were purchased this year on January 1 for $70,000. The rights are expected to have a five-year useful life to the company.
Required:
1. Compute the acquisition cost of each intangible asset.
Acquisition Cost
Patent
Trademark
0
2. Compute the amortization of each intangible for the current year ended December 31. (Do not round intermediate calculations.)
Amortization Expenses
Patent
Trademark
0
3. Show how these assets and any related expenses should be reported on the balance sheet and income statement for the current year.
BLUESTONE COMPANY
Income Statement (partial)
For the year ending December 31
BLUESTONE COMPANY
Balance sheet (partial)
At December 31
Intangibles:

Bluestone Company

1. Acquisition cost of each intangible asset:

Patent $3,200

Trademark = $0

Licensing Rights = $70,000

2. Amortization for the current year ended December 31:

Amortization Expenses:

Patent = $200 ($3,200/16)

Trademark = $7,500 (expensed in full)

Licensing Rights = $14,000 ($70,000/5)

3. BLUESTONE COMPANY

Income Statement (partial)

For the year ending December 31

Amortization Expenses:

Patent $200

Licensing Rights $14,000

Trademark expense $7,500

BLUESTONE COMPANY

Balance sheet (partial)

At December 31

Intangibles:

Patent                       $3,200

Acc. Amortization         200    $3,000

Licensing Rights  $70,000

Acc. Amortization   14,000   $56,000

Explanation:

a) Data and Calculations:

a. Purchased patent on January 1 for $3,200 Estimated life 16 years

b. Internally developed trademark is expensed: $7,500

c. Purchasing Licensing Rights on January 1 for $70,000 for 5 years

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.