Question - Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2011, the company expends $338,980 on a research project, but by the end of 2011 it is impossible to determine whether any benefit will be derived from it.
(a) The project is completed in 2012, and a successful patent is obtained. The R&D costs to complete the project are $131,900. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2012 total $23,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2012.
(b) In 2013, the company successfully defends the patent in extended litigation at a cost of $53,280, thereby extending the patent life to December 31, 2020. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2013.