Pocono Co.purchased a patent at the beginning of 2016 for $490,000 Economic benefits were expected for 7 years, but the patent's legal life was 20 years.Also during 2016, the company incurred research and development costs of $150,000.Patent amortization expense for 2016 is
A) $24,500
B) $150,000
C) $72,143
D) $70,000

Question

Quizplus · Accepted Answer

The patent should be amortized over its useful economic life of 7 years, not its legal life. Therefore, the annual amortization expense is $490,000 / 7 = $70,000.

Pocono CoPurchased a Patent at the Beginning of 2016 for $490,000