In January, 2006, Findley Corporation purchased a patent for a new consumer product for $720,000.At the time of purchase, the patent was valid for fifteen years.Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years.During 2011 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product.What amount should Findley charge to expense during 2011, assuming amortization is recorded at the end of each year?

Question

Quizplus · Accepted Answer

The patent had a useful life of 10 years, so the total amortization over 10 years would be $720,000/10 = $72,000 per year. Since the product was removed from the market in 2011, and assuming amortization is recorded at the end of each year, Findley Corporation would have already recorded amortization expense of $72,000 each year from 2006 to 2010, or a total of $360,000. Therefore, in 2011, they should charge the remaining unamortized amount of $360,000 to expense, resulting in a total amortization expense of $720,000 over the 10 years. So the correct answer is B) $360,000.

In January, 2006, Findley Corporation Purchased a Patent for a New