Bethany incurred $20,000 in research and experimental costs for developing a spe
ID: 2478006 • Letter: B
Question
Bethany incurred $20,000 in research and experimental costs for developing a specialized product during July of year 1. Bethany went through a lot of trouble and spent $10,000 in legal fees to receive a patent for the product in August of year 3. Bethany expects the patent to have a remaining useful life of 10 years.
What amount of research and experimental expenses for year 1, year 2, and year 3 may Bethany deduct if she elects to amortize the expenses over 60 months?
How much patent amortization expense would Bethany deduct in year 3 assuming she elected to amortize the research and experimental costs over 60 months?
(NOTES 1:
Ignore Start-up costs
Y1 is 2014 and Y2 is 2015
Only prepare Form 4562 for 2014 information
Don’t worry about any Y2 (2015) information or calculations
Final answer should be $1,214)
(NOTE 2: What's confusing me is that we have to put these figures into a Form 4562. I have no idea where or how to begin that.)
Explanation / Answer
Answer:1
Answer:2
Description Amount Explanation Research and experimental expenses 20000 Recovery period in months 60 Given in problem Monthly straight line amortization 333.33 20000/60 Bethany's business months during year 1 6 July through december Year 1 straight line amortization 2000 333.33*6 Bethany's business months during year 2 12 January through december Year 2 straight line depreciation 4000 333.33*12 Bethany's business months during year 3 before patent is issued in August 7 January through july Year 3 straight line amortization on research and experimental costs 2333 333.33*7 Accumulated amortization through july of year 3 8333 4000+2333+2000 Unamortized research and experimental expenditures as of August, year 3 11667 20000 - 8333Related Questions
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