Question

Culver Corporation purchases a patent from Sunland Company on January 1, 2020, for $78,000. The patent has a remaining legal life of 16 years. Culver feels the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Culver’s books is $62,400. In January, Culver spends $25,600 successfully defending a patent suit. Culver still feels the patent will be useful until the end of 2029.

Prepare the journal entries to record the $25,600 expenditure and 2022 amortization. (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.)

Account Titles and Explanation	Debit	Credit
enter an account title to record expenditure of patents	enter a debit amount	enter a credit amount
enter an account title to record expenditure of patents	enter a debit amount	enter a credit amount
(To record expenditure of patents)
enter an account title to record amortization expense	enter a debit amount	enter a credit amount
enter an account title to record amortization expense	enter a debit amount	enter a credit amount
(To record amortization expense)

Answer 1

Date	Account Titles and Explanation	Debit	Credit
January 1, 2022	Patent	$25,600
	Cash		$25,600
	(To record expenditure of patents)
December 31, 2022	Amortization expense - Patent	$11,000
	Accumulated amortization - Patent		$11,000
	(To record amortization expense)

Annual amortization of patent = Cost of patent /Useful life

= 78,000/10

= $7,800

$25,600 spent on successfully defending the patent suit will be amortized over the remaining useful life of patent.

Annual amortization of $25,600 = 25,600/8

= $3,200

Annual amortization of patent from 2022 onwards = 7,800+3,200

= $11,000

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