On January 2, 2018, David Corporation purchased a patent for $420,000. The remal

Question

On January 2, 2018, David Corporation purchased a patent for $420,000. The remalning legal lIife Is 12 years, but the company successfully defending a patent Infringement sult. The successful defense did not change the company's estimate of useful life Required Prepare journal entries related to the patent for 2018, 2019, and 2020. (If no entry Is required for a transactlon/event, select "No Journal entry required" In the first account fleld.) View transaction list Journal entry worksheet Record the purchase of the patent. Note: Enter debits before credits. Date General Journal Debit Credit January 02, 2018 Patent 420,000 Cash 420,000 Record entry Clear entry View general journal

Explanation / Answer

Answer

S No.

Journal

Debit

Credit

2-Jan-18

Patent

         420,000

Cash

         420,000

(Being Patent purchased)

31-Dec-18

Amortization Expense ($420,000 / 8 Years)

           52,500

Patent

           52,500

(Being patent Amortized)

31-Dec-19

Amortization Expense ($420,000 / 8 Years)

           52,500

Patent

           52,500

(Being patent Amortized)

1-Jan-20

Patent

           45,000

Cash

           45,000

(Being legal fees incurred)

31-Dec-20

Amortization Expense (Note)

           60,000

Patent

           60,000

(Being patent Amortized)

Note

New amortized cost = Cost – Amortization for 2 years + Legal fees incurred

= 420,000 – (52,500 * 2) + 45,000

New amortized cost = 360,000

Amortization cost per year = New Amortized Cost / Remaining life

= 360,000 / 6 Years (8 – 2 Years)

New Amortization cost per year = $60,000

S No.

Journal

Debit

Credit

2-Jan-18

Patent

         420,000

Cash

         420,000

(Being Patent purchased)

31-Dec-18

Amortization Expense ($420,000 / 8 Years)

           52,500

Patent

           52,500

(Being patent Amortized)

31-Dec-19

Amortization Expense ($420,000 / 8 Years)

           52,500

Patent

           52,500

(Being patent Amortized)

1-Jan-20

Patent

           45,000

Cash

           45,000

(Being legal fees incurred)

31-Dec-20

Amortization Expense (Note)

           60,000

Patent

           60,000

(Being patent Amortized)

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