Question

In January 2021 Boxer Corporation purchased a patent at a cost of $219,000. Legal and filing fees of $59,000 were paid to acquire the patent. The company estimated a 10-year useful life for the patent and uses the straight-line amortization method for all intangible assets. In January 2024, Boxer spent $40,000 in legal fees for an unsuccessful defense of the patent and the patent is no longer usable. The amount charged to income (expense and loss) in 2024 related to the patent should be: Multiple Choice $234,600. $ 67,800. $219,000. $ 40,000.

Answer 1

$234,600

Step-by-step explanation:

The computation of the amount charged is shown below;

Cost of patent os

= $219,000 + $59,000

= $278,000

Now

Amortization for 3 years i.e from 2021 to 2024

= ($278,000 ÷ 10) × 3

= $83,400

Now

Net cost of patent is

= $278,000 - $83,400

= $194,600

And, finally

Amount charged to income is

= $194,600 + $40,000

= $234,600