During 2013, Debbie Company incurred $240,000 in legal fees in defending a patent with a carrying value of $4,500,000 against an infringement. Debbie's lawyers were not successful with the defense of the patent. The legal fees should be

Question

Quizplus · Accepted Answer

The legal fees incurred to defend the patent should be expensed in 2013 as they did not result in a successful defense of the patent. These fees should be classified as an ordinary expense on the income statement. Capitalization and amortization of legal fees are only allowed if they result in a successful defense of the patent.

During 2013, Debbie Company Incurred $240,000 in Legal Fees in Defending