On January 1, Year 1, Stiller Company paid $200,000 to obtain a patent. Stiller expected to use the patent for 5 years before it became technologically obsolete. The remaining legal life of the patent was 8 years. Based on this information, what is the amount of amortization expense during Year 3 and the book value of the patent as of December 31, Year 3, respectively?

a. The amount of amortization expense during Year 3 is $40,000.

b.The book value of the patent as of December 31, Year 3 is $80,000.

Explanation:

For amortization of patient, it is done using which one is shorter between the useful life and legal life.

We therefore use the useful life in this question since it is the one that is shorter to amortize as follows:

Annual amortization expenses = $200,000 ÷ 5 = $40,000

Accumulated annual amortization for 3 years = $40,000 × 3 = $120,000

Book value of the patent in year 3 = $200,000 - $120,000 = $80,000

Therefore, the amount of amortization expense during Year 3 is $40,000 and the book value of the patent as of December 31, Year 3 is $80,000.

$40,000 and $80,000

Explanation:

Amortization expense/year=($200,000/5)=$40000/year.

Hence amortization expense for December 31,2018= $40,000

Book value as on December 31,2018=$200,000-(40000*3)=$80,000

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answer(c) factors of production;