On January 1, 2013, Sanchez Company paid $160,000 to obtain a patent. Sanchez expected to use the patent for 5 years before it became technologically obsolete. The remaining legal life of the patent was 8 years. Based on this information, the amount of amortization expense on the December 31, 2015 income statement and the book value of the patent on the December 31, 2015 balance sheet would be:
A)$20,000/$60,000.
B)$32,000/$64,000.
C)$20,000/$100,000.
D)$32,000/$96,000.

Question

Quizplus · Accepted Answer

Patents are amortized over the shorter of their legal or useful lives. $160,000 cost of patent/5 years = $32,000 annual amortization expense; $160,000 - ($32,000 x 3 years) = $64,000 book value

On January 1, 2013, Sanchez Company Paid $160,000 to Obtain