Berry Co.purchases a patent on January 1,2018,for $40,000 and the patent has an expected useful life of five years with no residual value.Assuming Berry Co.uses the straight-line method,what is the carrying value of the patent on December 31,2019?

Question

Quizplus · Accepted Answer

The straight-line depreciation method means that the cost of the patent will be depreciated evenly over its expected useful life of 5 years.
Depreciation per year = (Cost - Residual Value) / Useful Life = ($40,000 - $0) / 5 = $8,000 per year
To find the carrying value of the patent on December 31, 2019, we need to calculate the accumulated depreciation from January 1, 2018, to December 31, 2019, which is 2 years.
Accumulated depreciation = Depreciation per year x Number of years = $8,000 x 2 = $16,000
Carrying value = Cost - Accumulated depreciation = $40,000 - $16,000 = $24,000. Therefore, the answer is option C.

Berry CoPurchases a Patent on January 1,2018,for $40,000 and the Patent