ExpertEasy1 markMultiple Choice
CPA · Question 36 · Area II: Technical Accounting
A company acquires a patent for $50,000. The patent has a remaining legal life of 15 years, but the company expects the technology to be obsolete in 5 years. What is the amortization expense for the first year?
A company acquires a patent for $50,000. The patent has a remaining legal life of 15 years, but the company expects the technology to be obsolete in 5 years. What is the amortization expense for the first year?
Answer options:
A.
$3,333
B.
$10,000
C.
$0
D.
$50,000
How to approach this question
Amortization Period = Shorter of Legal Life or Economic/Useful Life.
Full Answer
B.$10,000✓ Correct
Intangible assets are amortized over their useful economic life, which is the shorter of the legal life or the expected period of use. 5 years < 15 years. $50,000 / 5 = $10,000.
Common mistakes
Using legal life blindly.
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