Question

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 Depreciation 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 $62,000 and credit Patent for $62,000.

D) report no Amortization Expense because patents are not subject to amortization.

Answer: C

Feedback: Amortization is credited directly to the Patent account; a contra account is not necessary.

Solution: Amortization Expense = Cost Useful Life

Amortization Expense =$620,000 10

Amortization Expense =$62,000

Answer

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