On january 1, 2016, pharoah co. purchased a patent for $1,680,875. the patent is being amortized over its remaining legal life of 15 years expiring on january 1, 2031. during 2019, pharoah determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition. what amount should be reported in the balance sheet for the patent, net of accumulated amortization, at december 31, 2019

$1,152,600.00  

Explanation:

Given

Cost of purchase = $1,680,875

Initial useful life = 15 years

Yearly amortization expense = $1,680,875/15

                                                =  $112,058.33

Between January 1, 2016 and 2018, the amount amortized

= $112,058.33 × 3

=  $336,175.00  

Net book value as at the beginning of 2019 = $1,680,875 - $336,175.00  

                                                                         = $ 1,344,700.00  

Since during 2019, Pharoah determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition, it means the patent can only be amortized for 7 more years (10 - 3).

Therefore amortization charge for 2019

= $1,344,700.00/7

= $192,100

Net book value of patent at 31 December 2019 (net of accumulated amortization)

= $1,344,700.00 - $192,100.00

=  $1,152,600.00