Question

Johnson Industries acquired a patent on January 2nd, 2020, for $18,000. The patent was estimated to have a useful life of five years. On July 1st, 2022, the company incurred legal fees of $7,500 to successfully defend the patent in an infringement suit. How much amortization expense will Johnson recognize on the Income Statement for the year ended December 31st, 2022

Answer 1

The Answer is given below;

Step-by-step explanation:

Cost of Acquisition=$18,000

Legal Fees =$7,500

Total Cost=$25,500

Amortization per year=$25,500/5=$5,100

Please note that patent legal fees paid to defend the legal right is capitalized only if the suit is successfully defended in company's favor.

Amortization is charged evenly over the life of the patent which is intangible asset.