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Compute for the patent carrying value at december

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Reference no: EM132757083

San Lorenzo Company acquired patent right on July 1, 2018 for P2,000,000. The asset has a legal life of 15 years but due to the rapidly changing technology management estimates a useful life of only 5 years. On January 1, 2019, management is uncertain that the process can actually be made economically feasible, and decides to write down the patent to an estimated market value of P600,000. Amortization will be taken three years from this time. On January 1, 2020, after having perfected the related production process, the asset is now appraised at a sound value of P2,400,000. Furthermore, the estimated useful life is now believed to have extended by six more years. The company uses the straight-line method of amortization.

Instructions:

Problem 1: Compute for the following:

  1. Amortization expense for 2018.
  2. Impairment loss to be recognized in 2019
  3. Patent carrying value at December 31, 2019
  4. Revaluation surplus recognized in 2020.

Reference no: EM132757083

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