QUESTION 7
Snowbird Company was granted a patent on January 1, 2019, which had cost $68,000 and has a legal life of 17 years. However, due to expected
technological changes, the expected useful life of the patent is only 8 years. What is the amount of the patent's amortization expense for the year 2019?
O A. $4,000
O B. $1,700
OC. $68,000
O D.$8,500

=$8,500

Explanation:

Amortization is the depreciation of intangible assets. In calculating amortization, the cost of the asset and the expected lifespan is taken into consideration.

For Snowbird, the useful life of the patent is eight years. Usually, patents are not to be resold; hence the salvage value is zero.  The amount to be amortized in 2019 will be,

Asset cost $68,000

Useful life 8 years

The rate of amortization will be 1/8 x 100

=12.5%

Amortization amount = 12.5/100 x $68,000

=0.125 x $68,000

=$8,500

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