The cost of a patent should be amortized :
A) over 10 years.
B) over its economic life.
C) over 20 years or its economic life, whichever is shorter.
D) only if an impairment occurs.

Question

Quizplus · Accepted Answer

According to accounting principles, patents should be amortized over their useful economic life or 20 years, whichever comes first. This means that the cost of the patent should be spread out over the period during which it generates economic benefits for the company. Therefore, the best choice is C. Options A and B are incorrect because they do not specify a maximum period for the amortization of patents. Option D is incorrect because an impairment loss would only be relevant if the patent's value has decreased significantly due to external factors like competition or technological changes.

The Cost of a Patent Should Be Amortized