On January 1, Year 1, Stiller Company paid $288,000 to obtain a patent. Stiller expected to use the patent for 5 years before it became technologically obsolete. The remaining legal life of the patent was 8 years. Based on this information, the amount of amortization expense on the December 31, Year 3 income statement and the book value of the patent on the December 31, Year 3, balance sheet, respectively, would be:

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The patent is amortized over its useful life of 5 years. Annual amortization expense is $288,000 / 5 = $57,600. By December 31, Year 3, three years of amortization have occurred, totaling $57,600 * 3 = $172,800. The book value is $288,000 - $172,800 = $115,200.

On January 1, Year 1, Stiller Company Paid $288,000 to Obtain