Alta Co. spent $400,000 during the current year developing a new idea for a product that was patented during the year. The legal cost of applying for a patent license was $40,000. Also, $50,000 was spent to successfully defend the rights of the patent against a competitor. The patent has a life of 20 years. What amount should Alta capitalize related to the patent?

Question

Business

Carly

3 June, 16:13

Alta Co. spent $400,000 during the current year developing a new idea for a product that was patented during the year. The legal cost of applying for a patent license was $40,000. Also, $50,000 was spent to successfully defend the rights of the patent against a competitor. The patent has a life of 20 years. What amount should Alta capitalize related to the patent?

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Answers (1)

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Annika Ritter · Answer 1

amount of capitalize related to the patent is $90000

Explanation:

given data

spent = $400,000

patent license = $40,000

defend rights of the patent = $50,000

patent life = 20 years

solution

as we know that development cost of new product idea is an direct expense

so here Legal fee will be incurred for apply patent and successfully defend the patent right is the capitalized asset

so capitalize related to the patent is = $50,000 + $40,000

amount of capitalize related to the patent is $90000