On October 1, 2018, Northern Inc. purchased a patent for $204,000 cash. Although the patent gives legal protection for 20 years, the patent is expected to be used for only 10 years. The patent has no residual value. What will be the balance in the patent account on September 30, 2019?

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Quizplus · Accepted Answer

The patent is amortized over its useful life of 10 years. Annual amortization is $204,000 / 10 = $20,400. After one year, the balance is $204,000 - $20,400 = $183,600.