The Hui Company incurred the following expenditures in January 2010: (1)research and development costs of $210, 000 that resulted in a new product that was patented near year-end, (2)$6, 000 in legal fees to have the patent registered, (3)$90, 000 in advertising costs to develop a trademark for the newly patented product, (4)Legal fees of $8, 000 incurred with the registration of the trademark, and (5)$18, 000 of advertising costs to promote its good name.Benefits to be derived from the patent are expected to last for five years.The president believes the promotion of Hui's good name will benefit the firm for three years.How much amortization expense should Hui recognize for 2010?

Question

Quizplus · Accepted Answer

The patent registration cost of $6,000 is capitalized and amortized over 5 years, resulting in $1,200 per year. The trademark registration cost of $8,000 is also capitalized and amortized over 5 years, resulting in $1,600 per year. Total amortization expense for 2010 is $1,200 + $1,600 = $2,800.

The Hui Company Incurred the Following Expenditures in January 2010