At the end of 2017,Clock Products,Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for five years of its estimated 15-year legal life.Which of the following statements is correct?
A)Clock Products must continue to amortize the patent over its remaining ten years of life.
B)The patent must be reduced to 5/15,or 33.3% of its original cost and amortized over the remaining ten years.
C)The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.
D)Clock Products must correct its financial statements for the past five years,so that the entire cost is allocated to that five-year period.

Question

Quizplus · Accepted Answer

Since the patent has been determined to be worthless, Clock Products must remove the remaining unamortized cost from its accounting records and treat it as a loss on the income statement. This loss would be the difference between the original cost of the patent ($300,000) and the amount of amortization already taken ($300,000/15 years x 5 years = $100,000), or $200,000. Therefore, the correct choice is C. Choices A, B, and D are all incorrect.

At the End of 2017,Clock Products,Inc