Final answer:
The amortization expense for Moreno Company for the current year is $8,000, calculated by amortizing the cost of the patent ($96,000) over its useful life (8 years) and prorating for the partial year since the patent was acquired on May 1.
Step-by-step explanation:
The student has asked how to calculate the amortization expense for the current year for a patent purchased by Moreno Company. When a company purchases a patent, it is considered an intangible asset and should be amortized over its useful life. In this scenario, Moreno Company purchased a patent for $96,000 with an estimated useful life of 8 years, although the remaining legal life is 12 years.
Generally, for accounting purposes, the shorter of the useful life or legal life is used to calculate amortization. Since the useful life of the patent is 8 years, we would use that period for the amortization calculation. The annual amortization expense is calculated by taking the cost of the patent and dividing it by the useful life. Therefore, the annual amortization expense would be $96,000 / 8 years = $12,000 per year. However, since the patent was purchased on May 1st, we'll have to prorate the expense for the current year, which will be $12,000 x (8/12) = $8,000, because only 8 months of the current year is left after the purchase date.