July 1, 1991 Bought Patent for 114,000
July 1 ,1991 Legal Fees 6,000
Total July 1, 1991 120,000
Patent Life is 17 years.
Therefore, amortization expense per full year is: 120,000 / 17 = 7,058.82
Therefore, question A), the answer is a) $7,058.82
Summary:
July 1, 1991 Balance 120,000
1991 Amortization (50%) 3,529.41
1992 Amortization 7,058.82
Balance Jan 1, 1993 = 109,411.77
June 30, 1993 Legal Costs for defending Patent 10,000
It is simpler to just separate the 1993 amortization expense, then add them together.
So for the patent, the amortization expense is 7,058.82. Plus we must add on the legal law suit which is 10,000 / 15 (as 2 years have passed) = 666.66 x .50 because its only half of 1993 = 333.33
Total 1993 Amortization Expense = 7,058.82 + 333.33 = 7,392.15, or answer C to question B
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