Failure to record amortization expense on a patent during the current year will result in which of the following?
A)Net income will be overstated,but there would be no effect on total assets.
B)Net income for the year and total assets would both be overstated.
C)Assets will be overstated,but there would be no effect on net income for the year.
D)Net income and assets will both be understated.

Question

Quizplus · Accepted Answer

Amortization expense reduces net income because it is an expense. If it is not recorded, expenses are understated, and net income is overstated. Since amortization also reduces the carrying amount of the intangible asset (in this case, a patent), failing to record it means the asset remains at a higher value on the balance sheet, thus overstating total assets.

Failure to Record Amortization Expense on a Patent During the Current