LRF Corporation purchased a patent for $450,000 on September 1, 2006.It had a useful life of 10 years.On January 1, 2008, LRF spent $110,000 to successfully defend the patent in a lawsuit.LRF feels that as of that date, the remaining useful life is 5 years.What amount should be reported for patent amortization expense for 2008?
A)$103,000.
B)$100,000.
C)$94,000.
D)$78,000.

Question

Quizplus · Accepted Answer

The total cost of the patent is $450,000 + $110,000 = $560,000. The remaining useful life as of January 1, 2008 is 5 years, so the annual amortization expense is $560,000 / 10 = $56,000. The additional legal cost of $110,000 is not amortized over the remaining life of the patent, but rather expensed in the current year. Therefore, the total amortization expense for 2008 is $56,000, and the answer is B.

LRF Corporation Purchased a Patent for $450,000 on September 1