On January 1,2012,Stetson Company paid $160,000 to obtain a patent.Stetson expected to use the patent for 5 years before it became technologically obsolete.Based on this information,the amount of amortization expense on the December 31,2014 income statement and the book value of the patent on the December 31,2014 balance sheet would be:

Question

Quizplus · Accepted Answer

The patent is amortized over 5 years, so the annual amortization expense is $160,000 / 5 = $32,000. By December 31, 2014, three years of amortization have occurred, totaling $96,000. The book value is the original cost minus accumulated amortization: $160,000 - $96,000 = $64,000.

On January 1,2012,Stetson Company Paid $160,000 to Obtain a Patent