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On January 1, Year 1, Toy Factory purchases a patent for a printing process for $40,000. The original legal life of the patent was 10 years, and there are 8 years remaining. However, due to expected technological obsolescence, the company estimates that the useful life of the patent is only 5 more years. What will be the amortization expense for the patent in Year 1?

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Answer:

Annual depreciation= $8,000

Explanation:

Giving the following information:

On January 1, Year 1, Toy Factory purchases a patent for a printing process for $40,000.

The company estimates that the useful life of the patent is only 5 more years.

To calculate the depreciation for the year, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= 40,000/5= $8,000

abiolataiwo2015

What will be the amortization expense for the patent in Year 1 is $8,000

Using this formula

Year 1 Patent amortization expense=Cost of patent/Patent useful life

Where:

Cost of patent=$40,000

Patent useful life=5 years

Let plug in the formula

Year 1 Patent amortization expense=$40,000/5 years

Year 1 Patent amortization expense=$8,000

Inconclusion What will be the amortization expense for the patent in Year 1 is $8,000.

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