Herzing AC 216 Creative Solutions purchased a patent from Russell Lazarus
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Herzing AC 216 Creative Solutions purchased a patent from Russell Lazarus
Creative Solutions purchased a patent from Russell
Lazarus, an inventor. At??the time of the purchase, the patent had two years
remaining. The president of?Creative Solutions decided to have the accountant
amortize the cost of the?patent, $200,000, over 10 years rather than two years.
His reasoning was that?the $200,000 has already been spent and stockholders
might ask a lot of?questions about a $100,000 expense showing up on the income
statement but?probably wouldn’t pay much attention to a $20,000 expense.??
- 1. What is Creative Solutions’ ethical responsibility to the
company’s stockholders???
- 2. According to GAAP, how should the amortization of
patents be treated?
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