At the end of 2016, 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?
A) Clock Products must continue to amortize the patent over its remaining 10 years of life.
B) The patent must be reduced to 5/15, or 33.3% of its original cost and amortized over the remaining 10 years.
C) The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.
D) Clock Products must correct its financial statements for the past five years, so that the entire cost is allocated to that five-year period.

Question

Quizplus · Accepted Answer

Since the patent has been determined to be worthless, the remaining unamortized cost should be removed from the accounting records and treated as a loss on the income statement. Option A and B are incorrect because the patent is worthless and has no remaining legal life. Option D is incorrect because there is no reason to correct the financial statements for the past five years as the patent had been properly amortized during that time.

At the End of 2016, Clock Products, Inc