Question

January 1, 20x1, as related to the establishment of the patent. On June 30, 20x2, Pitchfork spent $130,000 to successfully defend a patent infringement case against the drug. As a result, the estimated remaining useful life was determined to be 16 years from June 30, 20x2. Pitchfork uses the straight-line method to amortize intangibles. What is the amount of amortization expense Pitchfork will record on their December 31, 20x2, Income Statement

Answer 1

Answer:

The question is incomplete since the cost of the patent is missing. I will try to answer the question using some random number for the cost:

purchase cost of the patent = $200,000

assuming that the patent originally had a useful life of 10 years

patent amortization for 2021 = $200,000 / 10 = $20,000

patent's carrying value Dec. 31, 2021 = $200,000 - $20,000 = $180,000

since the company incurred legal costs = $130,000 and was able to extend the patent's useful life:

amortization expense January 1 to June 30 2022 = $20,000 x 6/12 = $10,000

carrying value of the patent on June 30, 2022 = $180,000 - $10,000 + $130,000 = $300,000

since the patent's useful life was extended to 16 years, starting June 30, 2022, the amortization expense per year = $300,000 / 16 years = $18,750

total amortization expense during 2022 = $10,000 (for the first 6 months) + $18,750/2 (for the remaining 6 months) = $10,000 + $9,375 = $19,375