Question

Award: 12.50 points Exercise 6-19 Computing and recording the amortization of intangibles LO 6-9, 6-10 Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items: Patent with 4 remaining years of legal life Goodwill S 36,700 40,900 Required a. Compute the annual amortization expense for these items b. Record the acquisition of the intangible assets and the related amortization expense for year 1 in a horizontal statements model shown below. Complete this question by entering your answers in the tabs below. Required A Required B Compute the annual amortization expense for these items. Patent per year Required B > PHILIPS

Answer 1

Goodwill will not be amortized, Patent will be amortized over the legal life of 4 years. Amortization expense is = (36700/4) Amortization expense is = $ 9,175/. Recording of the acquisition and amortization expense for the first year :- Net Equity Cash Goodwill Liabilities Cash flows Patent Revenue Expenses Income -77600 36,700 40,900 NA NA NA NA NA -77600 -9175 -9175 -9175 NA NA NA -9175 NA NA $ 77,600 is deducted from the cash and cash flow accounts in order to record the acquisition. The patent and good will accounts are each increased for the individual amounts Yearly amortization, the patent account is deducted for the 9,175. Expenses, net income and equity are all deducted by similar amount.