Question

On January 1, 2016, Biotek purchased a patent for a new product for $36,000. At the time of purchase, the patent was valid for 10 years; however, the patent's useful life was estimated to be only 5 years due to the competitive nature of the product. On December 31, 2018, the product is withdrawn from sale under governmental order because of an electrical hazard caused by the product. The charge against income during 2018 for this patent is?

Answer 1

If an intangible asset has a finite useful life, you should amortize it over that useful life. The amount to be amortized is its recorded cost, less any residual value. However, intangible assets are usually not considered to have any residual value, so the full amount of the asset is typically amortized. If there is any pattern of economic benefits to be gained from the intangible asset, then you should adopt an amortization method that approximates that pattern. If not, the customary approach is to amortize it using the straight-line method.

If the intangible asset's useful life is impaired then amortize the remaining carrying value With remaining useful life

Here Because of electrical hazard caused by the Product, so amortize the whole amount in during the sameyear2018