On 1 October 2016,Nurix Company purchased a patent for $200,000 cash.Although the patent gives legal protection for 20 years,the patent is expected to be used for only 10 years.What will be the balance in the patent account on 30 September 2017?

Question

Quizplus · Accepted Answer

Since the patent is expected to be used for 10 years out of its total 20 year legal protection, its useful life is only half (10/20) of its legal life. Therefore, the annual amortization will be $10,000 ($200,000/10 years). After one year of use, the balance in the patent account will be $190,000 ($200,000 - $10,000).

On 1 October 2016,Nurix Company Purchased a Patent for $200,000