Question

FIFA Footballs acquired a patent in 2018 at a cost of $600 million and amortizes the patent on a straight-line basis. During 2021 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost. FIFA's 2021 financial statements should include: Multiple Choice A patent balance of $600.0 million. Patent amortization expense of $60.0 million. A patent balance of $408.0 million. Patent amortization expense of $30.0 million.

Answer 1

Answer: A patent balance of $408 million.

Step-by-step explanation:

The following can be depicted from the question:

Patent Cost (2018) = $600 million

Less: Amortization for the first three years I.e 2018 - 2020. This will be:

= ($600/20) × 3 = $90 million

Balance as at 2020 = $600 - $90 = $510 million

The remaining patent life will be:

= 8 - 3 = 5 years

Then, Amortization in 2021 will be:

= $510 million / 5

= $102 million

Balance by 2021 will then be:

= $510 million - $102 million

= $408 million