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At what amount should the patent be carried on balance sheet

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Question - Harrel Company acquired a patent on an oil extraction technique on January 1, 2018 for $7,500,000. It was expected to have a 10 year life and no residual value. Harrel uses straight-line amortization for patents. On December 31, 2020, 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 Harrel's market interest rate, is $4,200,000. At what amount should the patent be carried on the December 31, 2020 balance sheet?

a. 7,500,000

b. 5,250,000

c. 6,400,000

d. 4,200,000

Reference no: EM132769452

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