Barry Company sells a patent for $25,000. The patent had an acquisition cost of $120,000 and accumulated amortization of $100,000 at the time of the sale. What was the amount of gain or loss recognized on the disposal of the patent

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Loriwalkr4912 Loriwalkr4912

03-11-2020
Business

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Barry Company sells a patent for $25,000. The patent had an acquisition cost of $120,000 and accumulated amortization of $100,000 at the time of the sale. What was the amount of gain or loss recognized on the disposal of the patent

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jepessoa jepessoa · Answer 1 · 2020-11-04T01:47:04+01:00

Answer:

Barry Company must recognize a $5,000 gain resulting fro the disposal of the patent.

Explanation:

the patent's book value = acquisition cost - accumulated amortization = $120,000 - $100,000 = $20,000

gain from disposal of patent = selling price - book value = $25,000 - $20,000 = $5,000

Since patents are intangible assets, they are amortized, not depreciated. But accumulated amortization works in the same way as accumulated depreciation, they both reduce the asset's carrying value.