In January 2016,Vega Corporation purchased a patent at a cost of $200,000.Legal and filing fees of $50,000 were paid to acquire the patent.The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets.In January,2019,Vega spent $40,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable.The amount charged to income (expense and loss)in 2019 related to the patent should be:
A)$ 40,000.
B)$ 65,000.
C)$215,000.
D)$ 25,000.

Question

Quizplus · Accepted Answer

The total cost of the patent was $250,000 ($200,000 purchase cost + $50,000 legal and filing fees). By 2019, 3 years of amortization would have been recorded, totaling $75,000 ($250,000 / 10 years * 3 years). The book value of the patent before the unsuccessful defense was $175,000 ($250,000 - $75,000). The unsuccessful defense cost $40,000, and since the patent is no longer usable, the total amount charged to income in 2019 is $215,000 ($175,000 book value + $40,000 legal fees).

In January 2016,Vega Corporation Purchased a Patent at a Cost