Lovejoy Co.purchased a patent on January 1,2011,for $714,000.The patent was being amortized over its remaining legal life of 15 years expiring on January 1,2026.During 2014,Lovejoy determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition.What amount should be charged to patent amortization expense for the year ended December 31,2014?
A) $47,600
B) $71,400
C) $81,600
D) $142,800

Question

Quizplus · Accepted Answer

The patent was initially amortized over 15 years, resulting in an annual amortization of $47,600 ($714,000 / 15). By 2014, 3 years of amortization had occurred, leaving a carrying amount of $571,200 ($714,000 - $142,800). With a revised useful life of 10 years from acquisition, the remaining 7 years (2014-2020) should be used for amortization. The new annual amortization is $81,600 ($571,200 / 7).