Question

Calculator The Lane Company incurred the following expenditures in January 2016: (1) research and development costs of $510,000 that resulted in a new product that was patented during the year, (2) $12,000 in legal fees to have the patent registered, (3) $100,000 in advertising costs to develop a trademark for the newly patented product, (4) Legal fees of $8,000 incurred with the registration of the trademark, which will only be used for five years, and (5) $25,000 of advertising costs to promote its good name. Benefits to be derived from the patent are expected to last for five years. The president believes the promotion of Lane's good name will benefit the firm for three years. How much amortization expense should Lane recognize for 2016? $25,000 $9,000 $4,000 $1,000

Answer 1

$4,000
Legal fees to have the patent registered	$12,000
Legal fees with the registration of the trademark	$8,000
	$20,000
Expected life	5 years
Amortization expense	$4,000
Working
Research and development costs	$510,000
(This should not be capitalized)
Advertising costs to develop a trademark	$100,000
(This should not be capitalized)
Advertising costs to promote its good name.	$25,000
(This should not be capitalized)