Question

= Send to Gradebook < Prev Next > Question 4 View Policies Current Attempt in Progress Harmax Limited spent $5,000 registering an internally developed patent and then another $20,000 defending and enforcing the patent in its first year. How should the patent be reflected in the financial statements? The full $25,000 expensed in the year. • $5,000 capitalized as Patent asset and the $20,000 expensed. $20,000 capitalized as Patent asset and the $5,000 expensed. The full $25,000 capitalized in the year. e Textbook and Media Attempts: 0 of 1 used Submit Answer Send to Gradebook < Prev Next >

plz solve this for me!!!

Answer 1

Solution: The answer is The full $25,000 capitalized in the year.

Reason:

1) Normally all the cost incurred for documentation and registration of patent are capitalized (here $5,000 ).

2) Another $20,000 is incurred for defending and enforcing the patent in first year. Defending and enforcing cost are capitalized only when such legal outcome is successful. Here in this question, there no such information about outcome of legal proceedings. so we considered it has successful and capitalize it.