The cost of successfully defending a patent suit should be
A) charged off in the current period.
B) amortized over the legal life of the purchased patent.
C) added to factory overhead and allocated to production of the product.
D) amortized over the remaining estimated useful life of the patent.

Question

Quizplus · Accepted Answer

The cost of successfully defending a patent suit should be amortized over the remaining estimated useful life of the patent because it is related to preserving or extending the economic benefits of the patent. Charging it off in the current period or adding it to factory overhead and allocating it to production of the product are not appropriate as it does not match with the benefit that the legal action generated. Amortizing it over the legal life of the purchased patent is not correct either as the legal action has no impact on the legal life of the patent.

The Cost of Successfully Defending a Patent Suit Should Be