Bates Company acquired patent rights on Jan 1, 2010 for $1,125,000. This has an

Question

Bates Company acquired patent rights on Jan 1, 2010 for $1,125,000. This has an estimated useful life of 10 years and incurred legal fees of $100,000. On January 1, 2012, the company successfully defended against a lawsuit in the amount of $100,000. The company had a total of R&D; expenditures related to the patent of $300,000. Based on the information above: A. What is the total cost of the patent and the amount of amortization expense for the year ending 2010? B. At December 31 of 2012 what would be the total amount of amortization expense recorded for the year?

Explanation / Answer

A. What is the total cost of the patent and the amount of amortization expense for the year ending 2010?

Cost of patent = 1125,000+100,000= 1225,000

SO AMortization of patent cost per year = $1225,000/10 = $122,500 in Year 2010

B. At December 31 of 2012 what would be the total amount of amortization expense recorded for the year?

Year 2010 & 2011, Accumulated AMortization = 2*122,500 = $245,000

Balance amortization = 1225,000-245,000 = $980,000

Add R&D during 2012 = $300,00

SO Total Amortization = 980,000+300,000 = 1280,000

So Amortization during 2012 = 1280,000/8 =$160,000

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