Question

Romo Company spent \(190,000 developing a new process, \)45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2017. How should these costs be accounted for in 2017?

Short answer

The $45,000 cost of obtaining the patent legitimately should be capitalized and amortized throughout the invention’s useful or legal life, whichever is shorter.

Step-by-step solution

Meaning of patent

A patent is a legal right granted to a person or company to reproduce, use, or sell an invention without the interference of others.

Accounting of Costs

In 2017, the $190,000 should be deducted as a research and development expense.

In 2017, the $91,000 will be deducted as selling and promotion expenditure.