Harrel Company acquired a patent on an oil extraction technique on January 1, 2014 for $6,250,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2015, the expected future cash flows expected from the patent were expected to be $750,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $3,500,000. At what amount should the patent be carried on the December 31, 2015 balance sheet?
A) $6,250,000
B) $6,000,000
C) $5,000,000
D) $3,500,000

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The Answer of Harrel Company acquired a patent on an oil extraction technique on January 1, 2014 for $6,250,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2015, the expected future cash flows expected from the patent were expected to be $750,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $3,500,000. At what amount should the patent be carried on the December 31, 2015 balance sheet?
A) $6,250,000
B) $6,000,000
C) $5,000,000
D) $3,500,000

Harrel Company Acquired a Patent on an Oil Extraction Technique