AJW Inc. acquired a patent on 1/1/2016 for $40,000 cash. The patent was estimate

Question

AJW Inc. acquired a patent on 1/1/2016 for $40,000 cash. The patent was estimated to have a useful life of 10 years with no residual value. On 12/31/2017, before adjustments were recorded for the year, management determined that the remaining useful life was 6 years (with that new estimate being effective as of 1/1/2017). On 6/30/2018 the patent was sold for $25,000.

1) Prepare the journal entry to record the acquisition of the patent on 1/1/2016

2) Prepare the journal entry to record the annual amortization for 2016

3) Compute the amount of amortization that would be recorded in 2017

4) Determine the gain or loss on sale on June 30, 2018

5) Prepare the journal entry to record the sale of the patent on June 30, 2018

Explanation / Answer

AJW Inc. acquired a patent on 1/1/2016 for $40,000 cash. The patent was estimate

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