The legal life of a patent is seventeen years

The legal life of a patent is seventeen years - Instead of...

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The legal life of a patent is seventeen years, which often exceeds the patent's useful life. Suppose a  company buys an existing, five-year-old patent for $100,000. The patent's remaining legal life is  twelve years. If the company believes the patent's remaining useful life is only ten years, they use the  straight-line method to calculate that $10,000 ($100,000 ÷ 10 = $10,000) must be recorded as  amortization expense each year. One way to record amortization expense of $10,000 is to debit amortization expense for $10,000 and  credit accumulated amortization-patent for $10,000.
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Unformatted text preview: Instead of using a contra-asset account to record accumulated amortization, most companies decrease the balance of the intangible asset directly. In such cases, amortization expense of $10,000 is recorded by debiting amortization expense for $10,000 and crediting the patent for $10,000. A similar entry would be made to record amortization expense for each type of intangible asset. The entry would include a debit to amortization expense and a credit to the accumulated amortization or intangible asset account....
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This note was uploaded on 11/14/2011 for the course ACCT 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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