Martinez, Inc. acquired a patent on January 1, 2017 for $41,300 cash. The patent was estimated...

Martinez, Inc. acquired a patent on January 1, 2017 for $41,300 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $26,300.

Required:

Prepare the journal entry to record the acquisition of the patent on January 1, 2017.
Prepare the journal entry to record the annual amortization for 2017.
Compute the amount of amortization that would be recorded in 2018.
Determine the gain (loss) on sale on June 30, 2019.
Prepare the journal entry to record the sale of the patent on June 30, 2019.

Solutions

Expert Solution

Date	Particulars	Debit($)	Credit($)
a. 01/01/2017	Patent Account…..Dr. To Cash Account	41300	41300
b. 31/12/17	Amortization Account…Dr. To Patent Account	4130	4130
c. 31/12/18	Amortization Account…Dr. To Patent Account	5310	5310
e. 30/06/19	Cash Account….Dr. Amortization Account…Dr. Loss on sale account…Dr. To Patent Account	26300 2655 2905	31860

b. Amortization for 31/12/17=cost of patent/useful life =$41300/10=$4130

c.Value before amortization for 2018=purchase price-amortization for 2017=$41300-4130=$37170

Remaining life 7 years

Amortization for 2018=value for amortizing/remaining life=37170/7=$5310

d. Value as on 01/01/2019= purchase price-amortization for 2017 and 2018=41300-4130-5310=31860

Amortization for entire year=$5310

Amortization for 6 months(January, 2019 to June, 2019)=depreciation for entire year*6/12 =$5310*6/12=$2655

Therefore cost of patent as on 30 th June, 2019=Value on 1/1/19-Ammortization for 6 months =$31860-2655=$29205

Sales Price=$26300

Loss on sale=Cost as on 30/06/19-sale price=29205-26300=$2,905

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Martinez, Inc. acquired a patent on January 1, 2017 for $40,900 cash. The patent was estimated...

Martinez, Inc. acquired a patent on January 1, 2017 for $40,900 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2018, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1, 2018). On June 30, 2019, the patent was sold for $25,900. Required: Prepare the journal entry to record the acquisition...

Kingston, Inc., acquired a patent on January 1, 2016 for $40,000 cash. The patent was estimated...

Kingston, Inc., acquired a patent on January 1, 2016 for $40,000 cash. The patent was estimated to have a useful life of 10 years with no residual value, and the firm decided to use straight-line amortization. On January 1, 2017, management determined that the remaining useful life was actually only 6 years. On June 30, 2018, the patent was sold for $25,000. 1.Show the journal entry to record the acquisition of the patent on January 1, 2016 (3 points). 2....

Steven, Inc., acquired a truck on January 1, 2016 for $40,000 cash. The truck was estimated...

Steven, Inc., acquired a truck on January 1, 2016 for $40,000 cash. The truck was estimated to have a useful life of 10 years with no residual value, and the firm decided to use straight-line amortization. On January 1, 2017, management determined that the remaining useful life was actually only 6 more years. On June 30, 2018, the truck was sold for $25,000. How much would Steven record as the value of the truck when it is acquired on January...

Link Company acquired Tuna Inc. on January 1, 2017. On January 1, 2017 all of Tuna's...

Link Company acquired Tuna Inc. on January 1, 2017. On January 1, 2017 all of Tuna's assets and liabilities had a FVs = BV except for the following: Land was undervalued by $30,000 Buildings were overvalued by $45,000 (20-yr remaining useful life) Equipment was undervalued by $90,000 (5-yr remaining useful life) In addition, Tuna had internally developed a customer list with an appraised value of $150,000 and a 10-yr remaining useful life. Link originally acquired Tuna at the FV of...

On January 1, 2005, Technocraft, Inc., acquired a patent that was used for manufacturing semiconductor-based electronic...

On January 1, 2005, Technocraft, Inc., acquired a patent that was used for manufacturing semiconductor-based electronic circuitry. The patent was originally recorded in Technocraft's ledger at its cost of $1,779,000. Technocraft has been amortizing the patent over an expected economic life of 10 years. Residual value was assumed to be zero. Technocraft sued another company for infringing on its patent. On January 1, 2012, Technocraft spent $180,000 on this suit and won a judgment to recover the $180,000 plus damages...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $348,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $205,800. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $232,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $52,300 and an unrecorded customer list (15-year remaining life) assessed at a...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $362,400. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $214,200. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $241,600. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $82,600 and an unrecorded customer list (15-year remaining life) assessed at a...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $346,200. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $204,600. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $230,800. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $79,900 and an unrecorded customer list (15-year remaining life) assessed at a...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $351,600. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $207,900. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $234,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $88,600 and an unrecorded customer list (15-year remaining life) assessed at a...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of...

On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $372,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $220,000. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $248,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $70,000 and an unrecorded customer list (15-year remaining life) assessed at a...

Subjects