2 DOC INT ACCT QUIZ 1 - line amortization for patents. On...

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(TCO C) On January 2, 2011, Klein Co. bought a trademark from Royce, Inc. for $1,000,000. An independent research company estimated that the remaining useful life of the trademark was 10 years. Its unamortized cost on Royce's books was $800,000. In Klein's 2011 income statement, what amount should be reported as amortization expense? Your Answer: $100,000. CORRECT $ 80,000. $ 50,000. $ 40,000. Instructor Explanation: $1,000,000 ÷ 10 = $100,000. Chapter 12. Points Received: 4 of 4 5. Question: (TCO C) Harrel Company acquired a patent on an oil extraction technique on January 1, 2010 for $5,000,000. It was expected to have a ten-year life and no residual value. Harrel uses straight-
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Unformatted text preview: line amortization for patents. On December 31, 2011, the future cash flows from the patent were expected to be $600,000 per year for the next eight years. The present value of these cash flows, discounted at Harrel's market interest rate, is $2,800,000. At what amount should the patent be carried on the December 31, 2011 balance sheet? Your Answer: $5,000,000 $4,800,000 $4,000,000 CORRECT $2,800,000 Instructor Explanation: $5,000,000 [($5,000,000 10) 2] = $4,000,000. Chapter 12. Points Received: 4 of 4...
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