Harmax Limited had spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year.How should the patent be reflected in the financial statements?
A)The full $25,000 expensed in the year.
B)$5,000 capitalized as Patent asset and the $20,000 expensed.
C)$20,000 capitalized as Patent asset and the $5,000 expensed.
D)The full $25,000 capitalized in the year.

Question

Quizplus · Accepted Answer

The full $25,000 should be capitalized as a Patent asset because both the registration and defense costs are directly attributable to securing the patent and ensuring its future economic benefits.

Harmax Limited Had Spent $5,000 Registering an Internally Developed Patent