On January 2, 2019, Adelphi Company purchased a patent for $210,000 plus $9,000 in legal fees. On that date, the patent had a remaining legal life of 13 years. Adelphi Company expects to use the patent for 9 years after which time it will be worthless. How much is the annual amortization expense for 2019? Round to nearest whole dollar.
Solution
Given:
Cost of patent $210000
Legal expenses $9000
Estimated life 13years
Useful life 9 years
Calculation:
Total cost of patent- Cost of patent+ Legal expenses
Total cost of patent= 210000+9000= 219000.
Annual amortization expenses:
Total cost of patent/Useful life of patent
219000/9 years= 24333.33
Thus the annual amortization expense for 2019 is $24333.33.
Note: The useful life of the asset means how much time the asset will be useful for the company and not on the basis of how many years the asset will last for. So in this question useful life is taken as 9 years because after 9 years the asset will become worthless.
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