A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2009 for $1,800,000.The company uses straight-line amortization for patents.On January 2, 2011, a new patent is received for a timed-release version of the same drug.The new patent has a legal and useful life of twenty years.The least amount of amortization that could be recorded in 2011 is

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The original patent is amortized over 6 years, so the annual amortization is $1,800,000 / 6 = $300,000. By 2011, two years have passed, so $600,000 has been amortized, leaving $1,200,000 to be amortized over the remaining 4 years. Thus, the amortization for 2011 is $1,200,000 / 4 = $300,000. The new patent does not affect the amortization of the old patent, and the least amount of amortization recorded in 2011 is $300,000.

A Company Acquires a Patent for a Drug with a Remaining