Reference no: EM132712863

Owen Inc. developed a new machine for manufacturing bags. Because the machine is considered very valuable, the company had it patented. The following expenditures were incurred in developing and patenting the machine.

Purchases of special equipment to be used solely for development of the new machine 1,820,000
Research salaries and fringe benefits for engineers and scientists           171,000
Cost of testing prototype                                                                 236,000
Legal costs for filing for patent                                                            127,000
Fees paid to government patent office                                                     25,000
Drawings required by patent office to be filed with patent application              47,000

• Own elected to amortize the patent over its legal life. At the beginning of the second year, Own Enterprises paid P240,000 to successfully defend the patent in an infringement suit. At the beginning of the fourth year Owen determined that the remaining estimated useful life of the patent was five years.

Problem 1: What the carrying amount of the patent at the end of fourth year is

a. 1,649,680
b. 135,320