Albritton Inc.bought a patent for $900,000 on January 2,2010,at which time the patent had an estimated useful life of ten years.On February 2,2014,it was determined that the patent's useful life would expire at the end of 2016.How much would Albritton record as amortization expense for this patent for the year ending December 31,2014?
A) $200,000
B) $180,000
C) $110,000
D) $90,000

Question

Quizplus · Accepted Answer

Using the straight-line method, the annual amortization expense would be $90,000 ($900,000/10 years). However, since it was determined on February 2, 2014, that the useful life would expire at the end of 2016, there would only be three years (2014, 2015, and 2016) of useful life remaining. Therefore, the total remaining amortization expense would be $270,000 ($90,000 x 3 years). For the year ending December 31, 2014, Albritton would record 11/12 of the annual amortization expense, since the patent was purchased on January 2, 2010. This results in an amortization expense of $82,500 ($90,000 x 11/12).

Therefore, the best choice is B, $180,000.