Question

Wriglee, Inc. went to court this year and successfully defended its patent from infringement by a competitor. The cost of this defense should be charged to

a. patents and amortized over the legal life of the patent.
b. legal fees and amortized over 5 years or less.
c. expenses of the period.
d. patents and amortized over the remaining useful life of the patent.

Answer 1

Costs related to the defense of a patent infringement should be capitalized to the patent's book value and amortized over its remaining useful life.

Step-by-step explanation:

When Wriglee, Inc. successfully defended its patent from infringement by a competitor, the costs related to this legal defense should be charged to patents and amortized over the remaining useful life of the patent. This is in accordance with accounting principles that dictate such legal expenses be capitalized as part of the intangible asset's book value and then systematically expensed over the period in which the asset will contribute to future cash flows, typically the asset's useful life.