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15 June, 00:01

Eisenhower Corporation purchased a patent for $1,850,000 on November 30, 2015. It has a remaining legal life of 18 years. Eisenhower estimates that the remaining useful life of the patent is 15 years. What balance will be reported on the December 31, 2017 balance sheet for the patent (if necessary, round your answer to the nearest dollar) ? (a) $1,850,000. (b) $1,583,678. (c) $1,593,056. (d) $1,485,606.

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  1. 15 June, 02:22
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    The correct option is c $1,593,056.

    Explanation:

    Patent : The patent is an intangible asset in which amortization is to be charged every year till its useful life. An intangible asset is also known as long term asset which cannot be seen or even touched.

    As in the given question the patent is purchased on November 30 but we have to reported on the December 31, 2015, so the total months between them is 25 months.

    And, the remaining useful life of patent is 15 years we have to convert the years into months.

    So, 15 * 12 months in a year = 180 months.

    Since, for 180 months the $1,850,000 is given, we have to compute for 25 months. The computation is shown below:

    = ($1,850,000 * 25) : 180

    = $256,944

    Hence, the balance would be Purchase cost - amortization expense

    = $1,850,000 - $256,944

    = $1,593,056

    Thus, the correct option is c $1,593,056.
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