Reference no: EM132454908

Questions -

Q1. Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.'s $5 par value common stock and $75,000 cash. When the patent was initially issued to Maxi Co., Mini Corp.'s stock was selling at $7.50 per share. When Mini Corp. acquired the patent, its stock was selling for $9 a share. Mini Corp. should record the patent at what amount?

a. $87,500

b. $93,750

c. $97,500

d. $75,000

Q2. Day Company purchased a patent on January 1, 2010 for $360,000. The patent had a remaining useful life of 10 years at that date. In January of 2011, Day successfully defends the patent at a cost of $162,000, extending the life of the patent to 12/31/22. What amount of amortization expense would Kerr record in 2011?

a. $36,000

b. $40,500

c. $43,500

d. $54,000

Q3. Howard Company acquired a patent on a coal extraction technique on January 1, 2010 for $8,000,000. It was expected to have a 20-year life and no residual value. Howard uses the straight-line amortization for all patents. On December 31, 2011, the future cash flows from the patent were expected to be $1,200,000 per year for the next 12 years. The present value of these cash flows, discounted at Howard's market interest rate, is $4,300,000. At what amount should the patent be carried on the December 31, 2011 balance sheet?

a. $8,000,000

b. $7,200,000

c. $6,600,000

d. $6,000,000