Pastel Co Purchased a Patent on January 1, 2008, for $714,000

question 78

Multiple Choice

Pastel Co. purchased a patent on January 1, 2008, for $714,000. The patent was being amortized over its remaining legal life of 15 years expiring on January 1, 2023. During 2011, Pastel determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition. What amount should be charged to patent amortization expense for the year ended December 31, 2011?

• A) $47,600
• B) $71,400
• C) $81,600
• D) $142,800

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Definitions:

Economic Profits

The offset between gross income and total liabilities, embracing both visible and hidden expenses.

Excess Capacity

The situation in which a firm operates below its maximum potential production level, indicating underutilization of resources.

Monopolistic Competition

A market scenario characterized by the presence of many companies offering differentiated products, permitting some level of pricing power.

Average Total Costs

The total production costs divided by the number of goods produced, reflecting the average cost per unit of output.