A company purchased a patent for $100,000 at the beginning of the current year which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in the current year?
A)$0
B)$5,000
C)$20,000
D)$100,000

Question

Quizplus · Accepted Answer

Amortization Expense = (Patent Cost - Residual Value) / Useful Life
Residual Value = 0 (Assumed)
Useful Life = 5 years
Amortization Expense = ($100,000 - $0) / 5 = $20,000. Therefore, the answer is C.

A Company Purchased a Patent for $100,000 at the Beginning