FIFA Footballs Acquired a Patent in 2015 at a Cost

question 6

Multiple Choice

FIFA Footballs acquired a patent in 2015 at a cost of $150 million and amortizes the patent on a straight-line basis. During 2018 management decided that the benefits from the patent would be received over a total period of 8 years rather than the 20-year legal life being used to amortize the cost. FIFA's 2018 financial statements should include:

• A) A patent balance of $150 million.
• B) A patent balance of $102 million.
• C) Patent amortization expense of $15 million.
• D) Patent amortization expense of $7.5 million.

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Definitions:

Fixed Cost

Costs that do not change with the level of output produced, such as rent, salaries, and insurance.

Cartel

An agreement among competing firms to control prices or exclude entry of a new competitor in the market, often resulting in higher prices and restricted supply.

Duopoly

A market structure in which two companies own all or nearly all of the market for a given product or service.

Price Effect

The impact on demand when the price of a product or service changes, influencing consumers' buying decisions.