Your Company Pays $620,000 for a Patent That Has 10

question 105

Multiple Choice

Your company pays $620,000 for a patent that has 10 years remaining.Each year,your company should:

• A)debit amortization expense for $62,000 and credit accumulated amortization for $62,000.
• B)debit intangible assets and credit accumulated amortization for an amount equal to 20% of book value.
• C)debit amortization expense for $31,000 and credit intangible assets for $31,000.
• D)report no amortization expense because patents are not subject to amortization.

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Definitions:

Indirect Labor

Labor costs not directly associated with the production of goods or services, such as administrative and support personnel.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing for more accurate budgeting and variance analysis.

Direct Labor Hours

Direct Labor Hours are the total hours worked by employees directly involved in the production of goods or services.

Budgeted Costs

Anticipated expenses for a specific period of time, used for planning and control purposes.