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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Business

Adison Weaver

9 May, 00:59

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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Jaxson Sutton · Answer 1

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