The CMS Co

The CMS Co. began operations in January 2016. Listed below are selected transactions for 2016 and 2017:
? During 2016, $125,000 in R&D expenditures were made to develop a new product that was patented on July 1, 2016. CMS believes the patent will provide benefits for ten years. Legal fees incurred were $24,000.
? On September 1, 2016, CMS paid EZ Company $180,000 for its patent on a successful product. The patent has six remaining years in its legal life.
? On October 1, 2016,CMS applied for and received a trade name from the government. The
legal costs associated with filing for the trade name were $10,000. In addition, during November 2016, the company incurred $50,000 in advertising its name. Benefits are expected indefinitely.
? In early January 2017, CMS paid $20,000 in legal fees to defend the patent acquired from
EZ. CMS's attorneys were successful in the lawsuit.
? During 2017, R&D expenditures of $90,000 were incurred in the development of a product.
A patent was received on December 1, 2017. Legal fees paid in connection with the patent were $15,000. The economic life of the product is expected to be five years.
Required:
a. Prepare a partial balance sheet for CMS Company as of December 31, 2017, showing the intangible assets. In support of your answer, prepare a separate schedule for each intangible asset. The company amortizes its intangible assets using the straight-line method and recognizes amortization to the nearest month.
b. Prepare a schedule to calculate CMS's expenses related to the above transactions for both
2016 and 2017.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free