Jason Purchases a Patent at a Cost of $24,000

question 80

Multiple Choice

Jason purchases a patent at a cost of $24,000. The patent has 8 years of legal life remaining from the date of purchase.
I.If the patent is the only asset Jason purchased, he must amortize the patent over 15 years.
II.If the patent was part of the purchase of all the assets of a business, he must amortize the patent over 15 years.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Cash Dividends

Payments made by a company out of its profits to its shareholders, typically in cash.

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment, and financing activities.

Noncash Investing

Transactions involving non-monetary assets or financing that affect a company's investing activities but do not involve cash flows.