Ivanhoe Co., organized in 2017, provided you with the following information. a)
ID: 2510434 • Letter: I
Question
Ivanhoe Co., organized in 2017, provided you with the following information.
a) Prepare the journal entries to record all the entries related to the patent during 2018. (Credit account titles are automatically indented when 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. Record journal entries in the order presented in the problem.)
Date
Account Titles and Explanation
Debit
Credit
1. Purchased a license for $30,880 on July 1, 2017. The license gives Ivanhoe exclusive rights to sell its services in the tri-state region and will expire on July 1, 2025. 2. Purchased a patent on January 2, 2018, for $81,800. It is estimated to have a 5-year life. 3. Costs incurred to develop an exclusive Internet connection process as of June 1, 2018, were $88,600. The process has an indefinite life. 4. On April 1, 2018, Ivanhoe Co. purchased a diode manufacturer for $696,600. Goodwill recorded in the transaction was $121,800. 5. On July 1, 2018, legal fees for successful defense of the patent purchased on January 2, 2018, were $15,624. 6. Research and development costs incurred as of September 1, 2018, were $88,600.Explanation / Answer
Journal to record entries related to Patent in 2018 Date Account Title & Explanation Debit credit 02/01/2018 Patent $81,800.00 cash $8,100.00 [Being Patent purchased] 01/07/2018 Patent $15,624.00 cash $15,624.00 [Being legal fees paid for successful defense ] Dec-18 Amortisation expense $16,699.00 Accumulated amortisation -Patent $16,699.00 Working Note : Computation of Amortisation Expense for 2018 Particular Amount Amortisation of patent purchased on 2 jan 2018 : 81800/5 $16,360.00 Amortisation of patent (legal fees) on 1 july :15624/5 *6/12 $1,562.40 Total $17,922.40
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