In January, 2002, Findley Corporation purchased a patent for a new consumer product for $720,000.At the time of purchase, the patent was valid for fifteen years.Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years.During 2007 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product.What amount should Findley charge to expense during 2007, assuming amortization is recorded at the end of each year?
A)$480,000.
B)$360,000.
C)$72,000.
D)$48,000.

Question

Quizplus · Accepted Answer

The patent was being amortized over 10 years, so the annual amortization expense is $720,000 / 10 = $72,000. By the end of 2006, 5 years of amortization would have been recorded, totaling $360,000. In 2007, the remaining unamortized balance of $360,000 should be charged to expense due to the product's removal from the market.

In January, 2002, Findley Corporation Purchased a Patent for a New