Question

Washburn Co. spent $10 million to purchase a new patented technology, debiting an intangible asset and crediting cash. Washburn uses SYD depreciation on its depreciable assets and plans to amortize the intangible asset on a straight-line basis. The appropriate accounting treatment is that:___________. 1. Washburn is not required to make any accounting adjustments. 2. Washburn has made a change in accounting principle, requiring retrospective adjustment. 3. Washburn is required to adjust a change in accounting estimate prospectively. 4. Washburn needs to correct an accounting error.

Answer 1

Answer:

1. Washburn is not required to make any accounting adjustments.

Explanation:

The treatment which will be appropriate for the accounting will be that the Washburn will not require to make any accounting.

Because Washburn has already spent lots of money in purchasing the new technology, and we can see that the company is using a straight-line basis. In straight-line basis, it comes from a division of the cost of asset's difference and its value that is been expected.

So if the company has used straight-line basis then the company has already calculated the amount and the company will not require to make any accounting.