Question

Novak Corporation purchases a patent from Wildhorse Company on January 1, 2020, for $69,000. The patent has a remaining legal life of 16 years. Novak feels the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Novak’s books is $55,200. In January, Novak spends $26,400 successfully defending a patent suit. Novak still feels the patent will be useful until the end of 2029.

Prepare the journal entries to record the $26,400 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

Credit Debit $ 26,400 Account Titles and Explanation Patents Cash (To record expenditure of patents) $ 26,400 $ 10,200 Amortization expense [($55,200+$26,400)/8 years) Patents (To record amortization expense) $ 10,200 Note: Remaining useful life = 10 years - 2 years = 8 years