Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2010 for $5,000,000.It was expected to have a 10 year life and no residual value.Malrom uses straight-line amortization for patents.On December 31, 2011, the recoverable amount of the patent was estimated to be $3,400,000.At what amount should the patent be carried on the December 31, 2011 balance sheet?

Question

Quizplus · Accepted Answer

The patent should be carried at the lower of its carrying amount ($4,000,000 after 2 years of amortization) or its recoverable amount ($3,400,000). Therefore, it should be carried at $3,400,000.

Malrom Manufacturing Company Acquired a Patent on a Manufacturing Process