Granite Enterprises Acquired a Patent from Southern Research Corporation on 1/1/09

question 101

Multiple Choice

Granite Enterprises acquired a patent from Southern Research Corporation on 1/1/09 for $4 million. The patent will be used for five years, even though its legal life is 20 years. Rocky Corporation has made a commitment to purchase the patent from Granite for $200,000 at the end of five years. Compute Granite's patent amortization for 2009, assuming the straight-line method is used.

• A)$380,000
• B)$400,000
• C)$760,000
• D)$800,000 The $200,000 purchase commitment is treated as the residual value of the patent.Amortization is as follows:
• ($4,000,000 200,000) 5 years = $760,000

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Definitions:

Digestive System

Organ system that consists of digestive organs (stomach, intestines, etc.) and accessory organs (liver, etc.); ingests and digests food; absorbs nutrients and eliminates wastes.

Photosynthesis

A biochemical process in green plants and certain other organisms that converts light energy into chemical energy, using carbon dioxide and water to produce glucose and oxygen.

By-product

A secondary product generated as a result of a manufacturing process, chemical reaction, or biological pathway, which was not the primary product or goal.

Thermodynamics

The branch of physics that deals with the relationships between heat and other forms of energy, and how energy affects matter.