E12-11B (Accounting for Patents) Thomas Industries has the following patents on its December 31, 2014, balance sheet. Patent Item Initial Cost Date Acquired Useful Life at Date Acquired Patent A $48,000 3/1/11 20 years Patent B $19,200 7/1/12 10 years Pat

E12-11B (Accounting for Patents) Thomas Industries has the following patents on its December 31, 2014, balance sheet.

    Patent Item         Initial Cost         Date Acquired       Useful Life at Date Acquired

    Patent A            $48,000                3/1/11                             20 years

    Patent B            $19,200                7/1/12                             10 years

    Patent C            $16,800                9/1/13                               8 years

The following events occurred during the year ended December 31, 2015.

1. Research and development costs of $347,000 were incurred during the year.

2. Patent D was purchased on July 1 for $10,800. This patent has a useful life of 12 years.

3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2015. The controller for Thomas estimates the future cash flows from Patent B will be as follows.

Year        Future Cash Flows

2016             $2,500

2017             $2,500

2018             $2,500

The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)

Instructions

(a) Compute the total carrying amount of Thomas’s patents on its December 31, 2014, balance sheet.

(b) Compute the total carrying amount of Thomas’s patents on its December 31, 2015, balance sheet.