Malrom Manufacturing Company Acquired a Patent on a Manufacturing Process

Multiple Choice

Malrom Manufacturing Company acquired a patent on a manufacturing process on January 1, 2006 for $10,000,000.It was expected to have a 10 year life and no residual value.Malrom uses straight-line amortization for patents.On December 31, 2007, the expected future cash flows expected from the patent were expected to be $800,000 per year for the next eight years.The present value of these cash flows, discounted at Malrom's market interest rate, is $4,800,000.At what amount should the patent be carried on the December 31, 2007 balance sheet?

A) $10,000,000
B) $8,000,000
C) $6,400,000
D) $4,800,000