Question

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?

Answer 1

Annual depreciation= $8,000

Step-by-step 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