Paulman Incurred $55,000 of Research and Experimental Expenses and Began

question 99

Essay

Paulman incurred $55,000 of research and experimental expenses and began amortizing them over 60 months during June of year 1. During May of year 3, Paulman received a patent based upon the research being amortized. $36,000 of legal expenses for the patent was incurred. The patent is expected to have a remaining useful life of 17 years.
1) What is the basis of the patent? (Round amortization for each year to the nearest whole number.)
2) What is the amortization expense with respect to the patent during the year it was issued? (Round final answer to the nearest whole number.)

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Definitions:

Variable Cost

Costs that vary in proportion to the volume of goods or services produced, such as materials and labor.

Fixed Costs

Definition: Business expenses that remain the same regardless of the level of production or sales.

Break-Even Point

The moment when the sum of all expenses matches the sum of all income, resulting in neither a profit nor a loss.

Revenue

The total income generated from the sale of goods or services related to a company's primary operations.