On January 1st, 2017 SydRo Corp. purchased a patent for use in it's business for $120,000....
On January 1st, 2017 SydRo Corp. purchased a patent for use in it's business for $120,000. It's estimated useful life is 6 years and its legal life is 10 years. On the December 31st, 2018 financials, what amounts would be reflected on both the income statement and balance sheet regarding this patent?
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A. I.S. - $80,000 B.S. $20,000
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B. I.S. - $12,000 B.S. $96,000
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C. I.S. - $96,000 B.S. $12,000
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D. I.S. - $20,000 B.S. $80,000
Homework Answers
Intangible Assets : It is an assets which does not have physical existence. Examples are patent, copyright, goodwill trademark etc. Initially it is be recorded at cost and subsequently reported at Cost less accumulated amortisation and accumulated impairment losses. Amortisation is done based on the useful life of the assets.
Amortisation = Cost / useful life
Amortisation(Charged to Income Statement) for 2018 = $120000/6 = $20000
Accumulated Amortisation as on 31st December, 2018 = ($20000+$20000) = $40000
Book Value on 31st December, 2018 =Cost - Accumulated Amortisation = $120000-$40000= $80000
correct answer is option (D) i.e. I.S. - $20,000 B.S. $80,000
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