In January, 2015, Tillicum Corp

question 78

Multiple Choice

In January, 2015, Tillicum Corp. purchased a patent for a new consumer product for $ 900,000. At the time of purchase, the patent was valid for 15 years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2020, the product was permanently removed from the market because of a potential health hazard. What amount should Tillicum recognize as an impairment loss for calendar 2020, assuming amortization has been recorded annually using the straight-line method with no residual value?

• A) $ 600,000
• B) $ 450,000
• C) $ 90,000
• D) $ 60,000

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Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain level of output, multiplied by the standard labor rate.

Variable Overhead

Costs of production that fluctuate with changes in production volume, such as utilities or raw materials, not directly tied to labor or capital.

Indirect Labor

Wages paid to employees who are not directly involved in production but support the process, such as maintenance and supervisory staff.

Precision Drills

High-accuracy tools used for making holes in various materials with exact measurements.