Intangible Assets: Amortization for year 5 for a patent

A company purchases a patent for $900K with an estimated life of 15 years. It is subsequently reduced to 10 years. During year 5, the product for which the patent is held is removed from market.

Does the company book 90,000 in depreciation for year 5? If not, what amount do they book?

© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/intangible-assets-amortization-for-year-5-for-a-patent-7dov

Solution Preview

... the patent specific to that product is no longer an asset worth anything.

As a result, the remaining book value of the asset must be written off as a loss. It would not be recorded as amortization, but as an extraordinary item of loss. It might be classified as discontinued operations.

New rules in recent years have determined that the write ...