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A patent is purchased for $12,000 and has a useful life of 12 years. What is the annual amortisation charge, and which account is credited?
A$1,000, crediting Accumulated Amortisation
B$1,000, crediting the Patents account
C$12,000, crediting the Patents account
D$1,000, crediting Amortisation Expense
Answer & Solution
Correct answer: B. $1,000, crediting the Patents account
1. Annual amortisation $= \$12{,}000 \div 12 = \$1{,}000$.
2. Unlike depreciation, no separate contra account is used for intangibles.
3. The intangible asset itself is credited, so the Patents account is reduced directly.
4. Option A invents a contra account; D credits the expense rather than the asset.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.8.1 "Amortization of an Intangible Asset", p.173_