whargo company purchased a valuable technology patent on January 1, 2020 for $425,000. The patent has...

whargo company purchased a valuable technology patent on January 1, 2020 for $425,000. The patent has a useful life of 21 years and legal life of 17 years. Journalize:

(a) the purchese of the parent for cash on January 1, 2020

(b) Amortization of the patent on december 31, 2020

Solutions

Expert Solution

Date	Particulars	Debit amount	Credit amount

Jan.1,2020	Patent	$425,000
	Cash		$425,000
	(Being patent purchased for $425,000)

Dec.21,2020	Amortization expense	$25,000
	Accumulated amortization - Patent		$25,000
	(Being annual amortization on patent)

Working notes:

1. When the patent is purchased, journal entry as above is recorded with purchase price.

2. Patent is amortized over the useful life or legal life, whichever is less. So, this patent will be amortized over 17 years, with annual amortization being $425,000 / 17 = $25,000. Journal entry for same would be a debit to 'amortization expense' and credit to ' accumulated amortization- Patent'

ekkarill92 answered 1 year ago

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