Homework Answers
Requirement 1: Prepare the following journal entry
| Date | Account Title and Explanation | Debit | Credit |
| Apr. 1 | Cash | $21,705 | |
| 2020 | Accumulated Amortization ($41,860 × 31 months ÷ 52 months) | $24,955 | |
| Patent | $41,860 | ||
| Gain on Sale of Patent ($21,705 + 24,955 − $41,860) | $4,800 | ||
| To record sale of patent at gain |
The estimated useful life of patent is 52 months (the difference between September 1, 2017 and December 31, 2021. The company sold the patent after 31 months (the difference between September 1, 2017 and April 1, 2020) and therefore the accumulated amortization is $24,955 ($41,860 × 31÷ 52) when the patent is sold. The gain on sale of patent is 4,800 ($21,705 + 24,955 − $41,860) and it should be credited as it is gain. Cash is debited when it is received. The contra-asset account balance of accumulated amortization should be debited to close it and credit the patent account to remove from the books of the company.
Requirement 2: Prepare the following journal entry
| Date | Account Title and Explanation | Debit | Credit |
| Apr. 1 | Cash | $12,055 | |
| 2020 | Accumulated Amortization ($41,860 × 31 months ÷ 52 months) | $24,955 | |
| Loss on Sale of Patent ($41,860 − $12,055 − $24,955) | $4,850 | ||
| Patent | $41,860 | ||
| To record sale of patent at loss |
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* Question 1 Wildhorse Ltd. purchased a patent on September 1, 2017 for $41,860....
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on January 1, 2020, for $100,800. The patent has a remaining legal
of 16 years. Sandhill feels the patent will be useful for 10 years.
Assume that at January 1, 2022, the carrying amount of the patent
on Sandhill's books is $80,640. In January, Sandhill spends $24,000
successfully defending a patent suit. Sandhill still feels the
patent will be useful until the end of 2029.
Prepare Sandhill's journal entries to record the...
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