Amortization Expense for Oriole Inc.'s Patent

What should be recorded as the amortization expense for Oriole Inc.'s patent at December 31, 2025?

Choose the correct option:

A. $56000

B. $112000

C. $168000

D. $0 because the value of the patent has not decreased

Final answer:

The amortization expense that should be recorded at December 31, 2025, for the patent is $560,000.

Explanation:

To calculate the amortization expense at December 31, 2025, we need to determine the remaining useful life of the patent. Since the patent was purchased on January 1, 2023, and the expected useful life is 10 years, the remaining useful life as of December 31, 2025, is 8 years.

The amortization expense is calculated by dividing the cost of the patent by its useful life. In this case, the cost of the patent is $560,000, and the remaining useful life is 8 years. Therefore, the annual amortization expense is $560,000 / 8 = $70,000.

Since Oriole Inc. did not record any amortization expense for the years 2023 and 2024, the total amortization expense to be recorded at December 31, 2025, would be the sum of the annual amortization expenses for the remaining useful life, which is 8 years. Therefore, the total amortization expense to be recorded is $70,000 * 8 = $560,000.