Question

The cost of successfully defending a patent suit should be

a. charged off in the current period.
b. amortized over the legal life of the purchased patent.
c. added to factory overhead and allocated to production of the product.
d. amortized over the remaining estimated useful life of the patent.

Answer 1

The cost of successfully defending a patent suit should be amortized over the remaining estimated useful life of the patent. Correct option is d.

Step-by-step explanation:

The cost of successfully defending a patent suit should be d. amortized over the remaining estimated useful life of the patent.

When a company incurs legal expenses to defend a patent suit, the cost should be amortized over the remaining estimated useful life of the patent. This means that the cost is spread out over the remaining time period during which the patent is expected to provide value to the company.

By amortizing the cost, the company recognizes the expense gradually over time, matching it against the revenue generated by the patent. This approach helps to reflect the economic impact of the legal expense more accurately and results in a more accurate representation of the company's financial position and performance.