A company purchases a patent for $50,000.The patent will be amortized over 5 years.The entry to record the amortization in the first year is:

Question

Quizplus · Accepted Answer

The company purchased a patent for $50,000 and will amortize it over 5 years. Amortization is the process of allocating the cost of an intangible asset over its useful life. Since the patent will be amortized over 5 years, the annual amortization expense will be $50,000/5 years = $10,000 per year. The entry to record the amortization in the first year would be to debit Amortization of Patents for $10,000 and credit Patents for $10,000. Therefore, the correct answer is B.

A Company Purchases a Patent for $50,000