[TimDay14]

NINJA Question –

Can anyone please help me with this? I feel like this should be an easy question, but I’ve been trying and trying and I can’t seem to get the right answer. Thanks!

Tiger Corporation purchases a patent from XYZ Company on January 1, 2015, for $40,000. The patent has a remaining legal life of 12 years. Tiger feels the patent will be useful for 10 years. On July 1, 2017, Tiger spends $6,000 successfully defending a patent suit. Tiger feels the patent will be useful until June 30, 2029. What is the amount of amortization in 2017?

A) $2,000

B) $3,500

C) $4,000

D) $4,500

[Ajay Rangarajan]

is it 3500 ??

AJ

[Anonymous]

depreciation first two years is $4k (use useful economic life or legal life, whichever is less)

then NOTE THE DATES. mid year successfully defended a suit; capitalize the costs and adjust depreciation life to 12 years BUT you have half year of depreciation at 4k so

40

(4)

(4)

(2)

carrying value at half year is 30,000 / 12 years or 2500 per year

I would think it would be the $2000 plus (2500/2) but I dont see that as an option so Im stumped.

Or do they want us to calculate the patent amortization separately? In which case its $500 per year for the patent but it would still only be half year in 2017 so $250?

[law0915]

1/1/15 $40,000/10years= 4k annual amortz.

2015 – $4k

2016 – $4k

2017 – $2k because of 1/2 year

---

$10,000 accum amortz

NBV before lawsuit @ 7/1/17:

$40,000

($10,000)

---

$30,000 NBV

+

$6,000 suit

=

$36,000 / 12 years remaining life

$3,000 new yearly amortz

/ 2 for half year 2017 amortz

=

$1,500

+ $2,000 other half of 2017 already taken

=

$3,500

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[Author]

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