WDS Company owns a patent with an estimated useful life of 15 years,a zero salvage value,and a historical cost of $42,000.Net income is $200,000 BEFORE the year-end adjustment related to the patent.What will net income be AFTER the proper year-end adjustment has been made?
A)$202,800
B)$200,000
C)$197,200
D)$194,000

Question

Quizplus · Accepted Answer

The year-end adjustment for the patent would be the amortization expense for the year, which can be calculated using the straight-line method as follows:
Amortization expense = (historical cost - salvage value) / useful life
Amortization expense = ($42,000 - $0) / 15 years
Amortization expense = $2,800
Therefore, net income after the adjustment would be:
Net income = $200,000 - $2,800
Net income = $197,200

WDS Company Owns a Patent with an Estimated Useful Life