8· value 10.00 points Martinez, Inc. acquired a patent on January 1, 2016 for $4
ID: 2567826 • Letter: 8
Question
8· value 10.00 points Martinez, Inc. acquired a patent on January 1, 2016 for $40,400 cash. The patent was estimated to have a useful life of 10 years with no residual value. On December 31, 2017, before any adjustments were recorded for the year, management determined that the remaining useful life was 6 years (with that new estimate being effective as of January 1, 2017). On June 30, 2018, the patent was sold for $25,400. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Required a. Prepare the journal entry to record the acquisition of the patent on January 1, 2016. View transaction list Journal entry worksheet Record the entry for acquisition of patent.Explanation / Answer
Patents are the technology related intangible assets which gives the holder exclusive right to use, manufacture or sell a product or process.
a. Purchased price of the patent will be capitalized in full in the year of purchase.
b.
Amortization of patent is done on the basis of useful life or legal life of asset (whichever is lower) Now Useful life of asset is 10 years so the asset will be amortized in 10 years. Also the residual value of patent is Nil.Amortization for 2016 is calculated as under:
40,400/10 = 4,040
Journal entry to record the amortization for 2016 is shown as below:
c. As the amortization year was changed to 6 years starting from january 1, 2017 so amortization for 2017 will be
d. gain (loss) on sale of patent is:
e. Journal entry to record sale of patent is:
Date Particulars L.F Amount ($) Amount ($) 2016 Jan-01 Patent 40,400 Cash 40,400 (For patent purchased)Related Questions
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