Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017, for $54,000. The patent has a remaining legal life of 12 years.

Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017, for $54,000.

The patent has a remaining legal life of 12 years.

Indigo feels the patent will be useful for 10 years.

Prepare Indigo's journal entries to record the purchase of the patent and 2017 amortization.

(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit


(To record purchase of patents)


(To record amortization of patents)

Expert Solution

A patent is an intangible asset and is amortized over its useful life. The useful life of the patent purchased by Indigo Corporation is 10 years.

Annual Amortization = Cost of Patent / Useful life of patent

Annual Amortization = $54,000 / 10 = $5,400

Journal Entries:

Date	Account Name	Debit	Credit
1-Jan-2017	Patent Dr.	$ 54,000
	Cash		$ 54,000
	(Being Patent purchased from Sandhill Company for $54000)

31-Dec-2017	Amortization Expense Dr.	$ 5,400
	Patent		$ 5,400
	(Being annual amortization of Patent)

A patent is an intangible asset and is amortized over its useful life. The useful life of the patent purchased by Indigo Corporation is 10 years.

Junaid answered 2 years ago

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