Accounting for Intangible Assets and Natural Resources On June 1, ABC Inc. purch
ID: 2403981 • Letter: A
Question
Accounting for Intangible Assets and Natural Resources
On June 1, ABC Inc. purchased a patent for $75,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year assuming ABC Inc. follows a calendar year.
On January 4, ABC Inc. purchased a music distributor's collection of lyrics and songs for $425,000. The copyrights are expected to last another 10 years. Prepare the journal entry to amortize the copyright at the end of the first year.
ABC, Inc.
Journal Entries
Date
Account Name
Debit
Credit
1-Jun
a)
4-Jan
b)
ABC, Inc.
Journal Entries
Date
Account Name
Debit
Credit
1-Jun
a)
4-Jan
b)
Explanation / Answer
ABC Inc.
Journal Entries
Date
Account Name
Debit
Credit
31-Dec
(a)
Amortization Expense : Patents
$4,375
Accumulated Amortization Expense : Patents
$4,375
31-Dec
(b)
Amortization Expense : Copyrights
$42,500
Accumulated Amortization Expense : Copyrights
$42,500
Explanation:
Accumulated Amortization Expense : Patents = $75,000 / 10 = $7,500
$7,500 / (7/12) = $4,375
Accumulated Amortization Expense : Copyrights = $425,000 / 10 = $42,500
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ABC Inc.
Journal Entries
Date
Account Name
Debit
Credit
31-Dec
(a)
Amortization Expense : Patents
$4,375
Accumulated Amortization Expense : Patents
$4,375
31-Dec
(b)
Amortization Expense : Copyrights
$42,500
Accumulated Amortization Expense : Copyrights
$42,500
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