Question

HW9#18: Free Response Question Pfizer Inc. incurred $950,000 of research & development in lab costs to develop a new medical device. Pfizer spent $200,000 in legal fees for a patent granted for the device on February 1, 2017. On November 1. 2017, Pfizer paid $400,000 for legal fees in a successful defense of the patent. The patent has a useful life of 4 years (round to whole numbers). Instructions: Use worksheet following slide. OPatent Amortization Expense $200,000/useful monthly lifex months Feb 1- Dec 31, 2017 $ Legal fees Amortization Expense $400,000/remaining useful life of patent x months Nov 1 Dec 31, 2017. $ What is the accumulated amortization amount for the Patents at December 31, 2017? 9-27 27 EX9#18: Free Response Question WORKSHEET MOTH JA B NARRAY JWAUG SEPT ONOK PARNTHIND OULMATAIO PEANG S76 28

Answer 1

1) Patent Amortization Expenses =

$ 200000 / useful monthly life * No.of months Feb 1 - Dec 31, 2017

= $ 200000/48 * 11 = 45833.33

i.e. 4166.67 per month from Feb 1 to Dec 31, 2017

2) Legal fees amortization expenses =

$ 400000 / remaining useful life of the patent * No. of Months Nov.1 - Dec 31, 2017

= 400000/39*2

= 20512.82

i.e. 10256.41 per month from Nov.1 to Dec.31, 2017.