Berry Co.purchases a patent on January 1,2012,for $40,000 and the patent has an expected useful life of five years with no residual value.Assuming Berry Co.uses the straight-line method,what is the carrying value of the patent on December 31,2013?

Question

Quizplus · Accepted Answer

The carrying value is calculated as the cost of the asset minus accumulated depreciation. Since the patent has a useful life of five years and is being depreciated using the straight-line method, the annual depreciation expense is ($40,000 - $0) / 5 = $8,000. 
For December 31, 2013, the patent has been in use for two years (2012 and 2013), so the accumulated depreciation is $8,000 x 2 = $16,000. 
Therefore, the carrying value of the patent on December 31, 2013, is $40,000 - $16,000 = $24,000, which corresponds to choice C.

Berry CoPurchases a Patent on January 1,2012,for $40,000 and the Patent