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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Heston Company acquired a patent on January 1, 2019, for $75,000. The patent has a remaining legal life of 15 years, but Heston expects to receive benefits from the patent for only 5 years. What amount of amortization expense does Heston record in 2019 related to the patent?

a. $5,000

b. $7,500

c. $15,000

d. $0-patents are not amortized.

To determine

Intangible Asset:

The intangible asset is the one which provides future economic benefit and cannot be touched or seen. It is expensed in the name of amortization.

To select:

The correct amount of amortization for the intangible asset.

Explanation

The patent is the intangible asset as it gives future economic benefit and is liable to be amortized.

The Heston Inc. acquired a patent with the following information:

Purchase Cost=$75,000Life of Patent=5 years

The amortisation is computed by using the following formula:

Amortisation Expense=Cost of the AssetResidual ValueUseful Life of the Asset

So, the amortisation exp

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