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4. Vaden Company purchased a patent from Williams Co. for $300,000 on January 1, 2016...

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Accounting

4. Vaden Company purchased a patent from Williams Co. for $300,000 on January 1, 2016 when there was 15 years remaining in the legal life of the patent. Vaden estimates that the useful life of the patent will be 10 years from the date of acquisition. Expenditures of $35,000 for successful litigation in defense of the patent were paid on January 1, 2021.

a. Compute the carrying value of the patent at December 31, 2021.

b. At the beginning of 2022, new market research indicates that the fair value of the patent is $130,000. Estimated future cash flows from the patent are $140,000 on January 1, 2022. Determine if the patent is impaired and, if so, prepare the journal entry necessary.

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