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?