On January 1, Year 1, Stiller Company paid $192,000 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, what is the amount of amortization expense during Year 3 and the book value of the patent as of December 31, Year 3, respectively?

Question

Quizplus · Accepted Answer

The amount of amortization expense for Year 3 can be calculated by dividing the remaining book value of the patent by the remaining useful life. The remaining book value can be calculated by subtracting the total amortization expense from the original cost:

Total amortization expense = ($192,000 / 5 years) x 3 years = $115,200

Remaining book value = $192,000 - $115,200 = $76,800

Therefore, the amount of amortization expense during Year 3 is $38,400 ($76,800 / 2 years).

The book value of the patent as of December 31, Year 3 is simply the remaining book value of $76,800.

On January 1, Year 1, Stiller Company Paid $192,000 to Obtain