Final answer:
The question focuses on the treatment of trademarks as intangible assets in accounting, where such assets are amortized over their useful lives. Trademarks can be renewed indefinitely, reflecting their ongoing value, whereas patents have a typically fixed term. For the given example, the annual amortization of a $200,000 trademark with a 20-year expected life would be $10,000.
Step-by-step explanation:
The subject of the question relates to the accounting treatment of trademarks which are a form of intellectual property. When a company acquires a trademark, it is recorded as an intangible asset on the balance sheet. The cost of acquisition is then amortized over the estimated useful life of the trademark, reflecting the decrease in value over time due to its finite useful life. Typically, a firm can renew a trademark repeatedly, ensuring its active use and continuous protection under the law. It's important to understand that trademarks differ from patents, with patents often having a fixed term, typically around 20 years before requiring renewal, whereas trademarks can be renewed indefinitely.
In the case of the student's question about the trademark acquired for $200,000 on January 1st, 2021, with an estimated useful life of 20 years, the annual amortization expense would be $10,000 ($200,000 / 20 years). This provides a systematic method of expensing the cost of the trademark against earnings, rather than expensing the entire cost in the year of acquisition.