Gami Corp. obtained a 12-year patent for its specialized manufacturing process at a cost of $240651....

Gami Corp. obtained a 12-year patent for its specialized manufacturing process at a cost of $240651. This cost includes $40353 that was spent in legal costs defending it. The estimated useful life of the patent is 7 years. What will be the annual depreciation expense for Gami’s patent?

Select one:

a. $28614

b. $16692

c. $20054

d. $34379

Expert Solution

Answer)

Calculation of Annual depreciation on patent

Annual depreciation on patent = Total cost of patent/ Estimated useful Life of the patent

= $ 240,651/ 7 years

= $ 34,379 (rounded off)

Therefore annual depreciation in the patent of the company will be $ 34,379 and the correct option in the given question is (d) $ 34,379.

Note: In the given case, the patent is obtained by the company on its special manufacturing process. Thus it is a self generated patent and accordingly filing cost, documentation cost, etc. Associated with the patent is included in cost of patent. Also, legal fees associated with the patent is also capitalized and thus included in the cost of the patent if the patent is successfully defended.

Accordingly, in the given case legal fees of $ 40,353 in defending the patent will be included in its cost of acquisition and will be depreciated over its useful life.

ekkarill92 answered 2 years ago

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