At the End of 2013, Clock Products, Inc

question 93

Multiple Choice

At the end of 2013, Clock Products, Inc.determined that one of its patents was worthless.The patent had a cost of $300,000.The patent had been amortized for 5 years of its estimated 15-year legal life.Which of the following statements is correct?

• A)Clock Products must continue to amortize the patent over its remaining 10 years of life.
• B)The patent must be reduced to 5/15, or 33.3% of its original cost and amortized over the remaining 10 years.
• C)The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.
• D)Clock Products must correct its financial statements for the past five years, so that the entire cost is allocated to that five-year period.

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Definitions:

Special Bank Account

A bank account designated for a specific purpose or to handle particular types of transactions, separate from general accounts.

Maturity Value

The amount payable to the holder of a financial instrument at its maturity date.

Note Payable

A written promise to pay a certain amount of money, typically including interest, by a certain date; a form of credit or loan.

360-Day Year

An accounting practice that simplifies interest calculation by assuming a year has 360 days.