Henson Company incurred $450,000 of research costs in its laboratory to develop a new product.It spent $60,000 in legal fees for a patent granted on January 2, 2011.On July 31, 2011, Henson paid $45,000 for legal fees in a successful defense of the patent.What is the total amount that should be debited to Patents through July 31, 2011?

Question

Quizplus · Accepted Answer

Only the legal fees associated with obtaining and defending the patent should be capitalized. Therefore, the total amount that should be debited to Patents is $60,000 + $45,000 = $105,000. The research costs should be expensed as incurred.

Henson Company Incurred $450,000 of Research Costs in Its Laboratory