In January, 2006, Findley Corporation purchased a patent for a new consumer product for $720,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2011 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Findley charge to expense during 2011, assuming amortization is recorded at the end of each year?

a. $480,000.

b. $360,000.

c. $72,000.

d. $48,000.

Question

Siena Ross

Business

6 June, 02:15

In January, 2006, Findley Corporation purchased a patent for a new consumer product for $720,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2011 the product was permanently removed from the market under governmental order because of a potential health hazard present in the product. What amount should Findley charge to expense during 2011, assuming amortization is recorded at the end of each year?

a. $480,000.

b. $360,000.

c. $72,000.

d. $48,000.

+5

Answers (1)

Know the Answer?

Leila Rosario · Answer 1

b. $360,000.

Explanation:

Data provided in the question

Purchase value of the patent = $720,000

At the time of purchase, the patent life is 15 years

And, the useful life of the patent is 10 years

So, the amortization expense recorded value is

= $720,000 : 10 years * 5 years

= $360,000

The five years is counted from the year 2006 to the year 2011