Question

On June 30, 2011, Cole Inc., exchanged 3,000 shares of Stone Corp. $30 par value common stock for a patent owned by Gore Co. The Stone stock was acquired in 2009 at a cost of $80,000. At the exchange date, Stone common stock had a fair value of $45 per share, and the patent had a net carrying value of $160,000 on Gore's books. Cole should record the patent at:

Answer 1

Answer:

$135000

Explanation:

Cole should record the patent at $135000. The intangible asset is recorded at the price at which it was purchased. Net carrying value of $160000 in the books of seller is not useful.

At the time of purchase of intangible asset, the fair value of stone stock exchanged was $45.

So the patent cost is =

3000 shares × $45 per share = $135000.

Cole should record the patent at this value.