Pharoah Corporation purchased a patent for $177,760 cash on April 2, 2018. Its l

Question

Pharoah Corporation purchased a patent for $177,760 cash on April 2, 2018. Its legal life is 20 years and its estimated useful life is 5 years. The company’s year end is December 31 and it prepares adjusting entries annually.

a) Prepare the journal entry to record the (1) purchase of the patent on April 2, 2018, and (2) amortization for the first year ended December 31, 2018.

b) Show how the patent would be reported on the statement of financial position at December 31.

No. Date Account Titles and Explanation Debit Credit (1) Apr. 2 (2) Dec. 31 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Show how the patent would be reported on the statement of financial position at December 31 PHAROAH CORPORATION Statement of Financial Position (Partial) Assets

Explanation / Answer

A.

B. BLance sheet:

No. Date Account Debit credit 1 Apr 2 Patent $177,760 Cash $277,760 2 Dec 31 Amortization expense-patent $26,664 Patent{(177,760/5)×9/12} $26,664

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