Question

My homework queston was: The company spent $50,000 to obtain and defend a patent for its formula for dog treats. The patent took effect on 1/1/20XX and provides 20 years of protection. The $50,000 amount was incorrectly charged to Misc. Expense. What I did was debit Patent (asset) and credit Miscellaneous Expense for 50,000. I also debited Patent Amorization for $2500 ($50000/20) and credited the Patent (asset) Is this correct? If so, does the amortization go in the Balance sheet. If not correct, can you help?

Answer 1

Yes it is correct,
Patent will be debited and miscellaneous expense will be credited by $50000, as earlier miscellaneous expense was inappropriately debited.

Amortization expense entry is also correct, only thing is expense should be included in name of account.

Patents are shown net of amortization in balance sheet. So amortization is not shown separately in balance sheet