Suppose you are the accountant for a certain pharmaceutical company. In January 2000, the company purchased the patent rights for a new medication from Novae, Inc., for $12,000,000. The patent had 15 years remaining as its useful life. In January 2005, your pharmaceutical company successfully defended its right to the patent in a lawsuit that cost $640,000 in legal fees.   (a) Using the straight-line method, calculate the patent's annual amortization expense (in $) for the years before the lawsuit.   (b) Calculate the revised annual amortization expense (in $) for the remaining years after the lawsuit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Suppose you are the accountant for a certain pharmaceutical company. In January 2000, the company purchased the patent rights for a new medication from Novae, Inc., for $12,000,000. The patent had 15 years remaining as its useful life. In January 2005, your pharmaceutical company successfully defended its right to the patent in a lawsuit that cost $640,000 in legal fees.
 
(a) Using the straight-line method, calculate the patent's annual amortization expense (in $) for the years before the lawsuit.
 
(b) Calculate the revised annual amortization expense (in $) for the remaining years after the lawsuit.
 
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