Question

Amortization Entries Kleen Company acquired patent rights on January 10 of Year 1 for $408,000. The patent has a useful life equal to its legal life of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $20,500 If required, round your answer to the nearest dollar a. Determine the patent amortization expense for the Year 4 ended December 31. b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization.

Answer 1

Cost of the patent			$ 408,000.00
Useful Life			8 years
Cost of lawsuit			$   20,500.00
Remaining useful life			5 years	(from Jan 7 of Year 4 to Dec 31 of Year 8)
Amortization Expense =			[(Cost of patent / useful life) + (cost of lawsuit / remaining life)]
		=	[($ 408000 / 8) + ($ 20500 / 5)]
		=	$   55,100.00

Journal
Date	Particulars			Debit	Credit
Dec 31, Year 4	Amortization Expense			$ 55,100.00
	To Accumulated amortization				$ 55,100.00