On January 2, 2018, David Corporation purchased a patent for $400,000. The remai

Question

On January 2, 2018, David Corporation purchased a patent for $400,000. The remaining legal life is 12 years, but the company estimated that the patent will be useful only for eight years. In January 2020, the company incurred legal fees of $30,000 in successfully defending a patent infringement suit. 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 transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 2 4 Record the purchase of the patent. Note: Enter debits before credits. Date General Journal Debit Credit January 02, 2018 Record entry Clear entry View general journal

Explanation / Answer

02-01-18 debit patent with $400,000

credit cash/bank with $400,000

Depreciation is to be taken only for 8 years as determined by the company

Depreciation will be $50,000 per annum

31-12-18 Depreciation 50000

Patents 50000

31-12-18 depreciation 50000

patents 50000

As Sucessful lawsuit didnt increase useful life of the asset it is to charged to revenue account

debit legal expense with 30000

credit cash/bank with 30000

31-12-20 depreciation 50000

patent 50000

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