Contemporary Mathematics for Business & Consumers 8th Edition by Robert Brechner,Geroge Bergeman

Exercise 22

In January 2002, Marine Science Corporation was awarded a patent for a new boat hull design. The life of the patent is 20 years. The company estimates the value of the patent over its lifetime is $7,500,000. Marine Science's accountant amortizes the patent using straight-line depreciation to zero value at the end of the 20 years. In January 2010, Marine Science successfully defended its patent in a lawsuit at a legal expense of $486,000.
a. Using the straight-line method, calculate the patent's annual amortization expense for the years before the lawsuit.
b. Calculate the revised annual amortization expense for the remaining years after the lawsuit.