Question

Amortization Expense Smith & Sons obtained a patent for a new optical scanning device. The fees incurred to file for the patent and to defend the patent in court against several companies which challenged the patent amounted to $45,000. Smith & Sons concluded that the expected economic life of the patent was 12 years. Calculate the amortization expense that should be recorded by Smith & Sons in the second year. $Answer

Answer 1

Answer:

The amortization expense that should be recorded by Smith & Sons in the second year is $3,750

Explanation:

The computation of the amortization expense in the second year is shown  below:

= (Cost of patent) ÷  (expected economic life of the patent)

= ($45,000) ÷ (12 years)

= $3,750

The amortization expense should be the same for the expected life i.e 12 years

For more understanding, we pass the journal entry which is shown below:

Amortization expenses A/c Dr $3,750

       To Patent A/c                           $3,750

(Being amortization expense recorded)