On January 1,2012,Portwell Company purchased a patent for $200,000.They estimate a useful life of 4 years.At the end of 2012,the Patent account will have a debit balance of $200,000,and there will be a credit balance in the Accumulated amortization account of $50,000.

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The debit balance in the Patent account remains at $200,000 because intangible assets like patents are not directly reduced for amortization. Instead, the amortization expense is recorded in the Accumulated Amortization account or as an expense, affecting the income statement. The statement incorrectly suggests a credit balance in Accumulated Amortization, which contradicts the typical accounting treatment where amortization expense reduces net income but does not directly reduce the book value of the intangible asset on the balance sheet.

On January 1,2012,Portwell Company Purchased a Patent for $200,000