Question

On June 1, 2019, Red Corporation purchased an existing business. With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent. The patent will expire in 20 years. Determine the total amount that Red may amortize for 2019 for the patent.

Answer 1

$11,666.67

Step-by-step explanation:

Data given in the question

Allocated purchase price to a patent = $300,000

Patent expiring period = 20 years

According to the section 197 , Legal life of the patent = 15 years

Since the legal life of the patent is 15 years so it would be amortized in 15 years itself

Now the amortization expense is

= $300,000 ÷ 15 years

= $20,000

Now the total amount for 7 months is

= $20,000 ÷ 12 months × 7 months

= $11,666.67