A Company Acquires a Patent for a Drug with a Remaining

question 25

Multiple Choice

A company acquires a patent for a drug with a remaining legal and useful life of six years on January 1, 2013 for $2,400,000. The company uses straight-line amortization for patents. On January 2, 2015, a new patent is received for a timed-release version of the same drug. The new patent has a legal and useful life of twenty years. The least amount of amortization that could be recorded in 2015 is

• A) $400,000.
• B) $ 80,000.
• C) $109,090.
• D) $ 92,000.

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Definitions:

Regressive

Refers to a tax system where the tax rate decreases as the taxable amount increases, often placing a higher burden on lower-income earners.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare among entities, determining who ultimately bears the cost of the tax.

Burden

The load, duty, responsibility, or stress placed upon an individual or entity.

Distribution of Income

The way in which a nation’s total earnings are divided among its population, or the way in which wealth is shared amongst individuals.