Your company pays $620,000 for a patent that has 10 years remaining.Each year,your company should:
A)debit amortization expense for $62,000 and credit accumulated amortization for $62,000.
B)debit intangible assets and credit accumulated amortization for an amount equal to 20% of book value.
C)debit amortization expense for $31,000 and credit intangible assets for $31,000.
D)report no amortization expense because patents are not subject to amortization.

Question

Quizplus · Accepted Answer

The best choice is A because the cost of the patent should be amortized over its remaining useful life, which is 10 years. Therefore, the annual amortization expense is $620,000/10 years = $62,000. The journal entry to record the amortization would be to debit amortization expense for $62,000 and credit accumulated amortization for $62,000. This would continue for each year until the patent's useful life is exhausted.

Your Company Pays $620,000 for a Patent That Has 10