At the end of 2013, Clock Products, Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for 5 years of its estimated 15-year legal life.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

When a patent is determined to be worthless, the remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement. Therefore, Clock Products should remove the remaining unamortized cost of $150,000 ($300,000 cost - $150,000 amortization) from their accounting records and report it as a loss on their income statement. Option A and B are incorrect because amortization is no longer valid when a patent is worthless. Option D is incorrect because the financial statements should only be corrected for errors, not for changes in estimates or market conditions.

At the End of 2013, Clock Products, Inc