n early January 2014, Paltel Company applied for a patent, incurring legal costs of $60,000. In January 2015, Paltel incurred $9,000 of legal fees in a successful defense of its patent. Instructions : (a) Compute 2014 amortization, 31/12/2014 carrying value, 2015 amortization, and 31/12/2015 carrying value if the company amortizes the patent over 10 years. (b) Compute the 2016 amortization and the 31/12/2016 carrying value, assuming that at the beginning of 2016, based on new market research, Paltel determines that the recoverable amount of the patent is $48,000.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
In early January 2014, Paltel Company applied for a patent, incurring legal costs of $60,000. In January 2015, Paltel incurred $9,000 of legal fees in a successful defense of its patent.
Instructions :
(a) Compute 2014 amortization, 31/12/2014 carrying value, 2015 amortization, and 31/12/2015 carrying value if the company amortizes the patent over 10 years.
(b) Compute the 2016 amortization and the 31/12/2016 carrying value, assuming that at the beginning of 2016, based on new
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