FIFA Footballs acquired a patent in 2015 at a cost of $150 million and amortizes the patent on a straight-line basis. During 2018 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost. FIFA's 2018 financial statements should include:
A) A patent balance of $150 million.
B) A patent balance of $102 million.
C) Patent amortization expense of $15 million.
D) Patent amortization expense of $7.5 million.

Question

Quizplus · Accepted Answer

Accumulated amortization at the end of 2018 is $48 million: 3 year's amortization at $7.5 million per year ($150 ÷ 20 years) plus one year's amortization at $25.5 million [($150 - 22.5) / (8 - 3) years]. $150 - 48 = $102.

FIFA Footballs Acquired a Patent in 2015 at a Cost