Answer:

amount should patent(s) be reported on the December 31, 2014, balance sheet,  = $ 504,360.

Working notes for the above answer is as under

We have been provided that, Nieland Industries had one patent recorded on its books as of January 1, 2014. This patent had a book value of $409,200 and a remaining useful life of 10 years.

So this patent will be amortized from 1.1.2014 to 12.31.2023 (i.e., 120 months)

At December 31, 2014 this patent would be stated at $409,200 less $40,920, or $368,280. (409200-40920)

In additoion to this  ,it was given that, on December 1, 2014, Nieland received the good news that its patent was valid and that its competitor could not use the process Nieland had patented. The company incurred $137,340 to defend this patent. Since the defense was successful, $137340, will be added to the original patent and this portion will be amortized over 109 months. (120 months less 11 months).

At December 31, 2012, this portion will be amortized only one month, i.e.

1/109*$137340

= or $1,260.

At December 31, 2014 this portion will be stated at

=$137340 – $1,260

= $136080

In total, this patent will be reported at $504360

(368280+136080)

Here it is important to understand that, you may capitalize legal cost to defend a patent only if the suit was successful, not otherwise it will not be capitalize.

Nieland incurred research and development costs of $100780 as R&D costs are expensed as incurred.

So amount should patent(s) be reported on the December 31, 2014, balance sheet,  = $ 504,360.