Henson Company incurred $600,000 of research costs in its laboratory to develop a new product. It spent $80,000 in legal fees for a patent granted on January 2, 2014. On July 31, 2014, Henson paid $60,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2014?

Question

Quizplus · Accepted Answer

The cost of obtaining a patent includes both the legal fees to obtain the patent (in this case, $80,000) and the legal fees to successfully defend the patent (in this case, $60,000). Therefore, the total amount that should be debited to Patents through July 31, 2014 is $140,000 ($80,000 + $60,000). The $600,000 in research costs are not relevant to the patent cost, as they are expensed as R&D rather than capitalized.

Henson Company Incurred $600,000 of Research Costs in Its Laboratory