During the year just ended, Jase Co. incurred research and development costs of $136,000 in its laboratories relating to a patent that was granted on July 1. Costs of registering the patent equaled $34,000. The patent’s legal life is 20 years, and its estimated economic life is 10 years. In its December 31 balance sheet, what amount should Jase report for the patent, net of accumulated amortization?

Answer (A) is correct. R&D costs are expensed as incurred. However, legal work in connection with patent applications or litigation and the sale or licensing of patents are specifically excluded from the definition of R&D. Hence, the legal costs of filing a patent should be capitalized. The patent should be amortized over its estimated economic life of 10 years. Amortization for the year equals $1,700 [($34,000 ÷ 10) × (6 ÷ 12)]. Thus, the reported amount of the patent at year end equals $32,300 ($34,000 – $1,700).