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A patent was acquired by Sunland Corporation on January 1, 2017, at a cost of $87,200. The useful life of the patent was estimated to be 10 years. At the beginning of 2020, Sunland spent $18,200 in successfully defending an infringement of the patent. At the beginning of 2021, Sunland purchased a patent for $26,880 that was expected to prolong the life of its original patent for 5 additional years.

Calculate the amortization expense for 2017.

Amortization Expense

$

  

  

Calculate the balance in the Patent account at the beginning of 2020, immediately after the infringement suit.

Balance in the Patent account

$

  

  

Calculate the amortization expense for 2020.

Amortization expense

$

  

  

Calculate the balance in the Patent account at the beginning of 2021, after purchase of the additional patent.

Balance in the Patent account

$

  

  

Calculate the amortization expense for 2021.

Amortization expense

Answer 1

Amortization expense = Cost of patent / Estimated useful life

Amortization expense for 2017 = $87,200 / 10 = $8,720

Balance in patent account at the beginning of 2020 before infringement suit = $87,200 - $26,160(8,720*3)

Balance in patent account at the beginning of 2020 before infringement suit = $61,040

Balance in patent account at the beginning of 2020 after infringement suit = $61,040+18,200 = $79,240

Amortization expense for 2020 = $79,240 / 7(10-3) = $11,320

Balance in patent account at the beginning of 2021 before purchase = $79,240 - 11,320 = $67,920

Balance in patent account at the beginning of 2021 after purchase = $67,920+26,880 = $94,800

Amortization expense for 2021 = $94,800 / 11(10-4+5) = $8,618