In 20x1, G Co. started to develop a patent. Total costs incurred during the year amounting to P400,000. On January 1, 20x2, the patent was fully developed. Legal and registration cost incurred in registering the patent amounted to P300,000. It was estimated that the patent has a useful life of 25 years. In 20x4, G Co. started to develop a new improved patent to extend the life of the old patent. Development costs totaled P800,000. On January 1, 20x5, the new patent was completed and legal and registration costs incurred to register the new patent amounted to P320,000. It was estimated that the new patent will extend the life of the old patent by another 20 years starting January 1, 20x5. How much is the amortisation expense in 20x5?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
May I ask for help with this question? I got an answer of 28,750 (Rounded Up) Please check.
In 20x1, G Co. started to develop a patent. Total costs incurred during the year amounting to P400,000. On January 1, 20x2, the patent was fully developed. Legal and registration cost incurred in registering the patent amounted to P300,000. It was estimated that the patent has a useful life of 25 years. In 20x4, G Co. started to develop a new improved patent to extend the life of the old patent. Development costs totaled P800,000. On January 1, 20x5, the new patent was completed and legal and registration costs incurred to register the new patent amounted to P320,000. It was estimated that the new patent will extend the life of the old patent by another 20 years starting January 1, 20x5. How much is the amortisation expense in 20x5?
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