Question

Brief Exercise 12-2 Flounder Corporation purchases a patent from Pharoah Company on January 1, 2017, for $80,000. The patent has a remaining legal life of 16 years. Flounder feels the patent will be useful for 10 years. Assume that at January 1, 2019, the carrying amount of the patent on Flounder's books is $64,000. In January, Flounder spends $32,800 successfully defending a patent suit. Flounder still feels the patent will be useful until the end of 2026. Prepare the journal entries to record the $32,800 expenditure and 2019 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 (To record expenditure of patents) (To record amortization expense)

Answer 1

	Amortization of the patent is done on the basis of useful life of the patent.
	CALCULATION OF THE AMORTIZATION AS PER STRAIGHT LINE METHOD PER YEAR
	Purchase Cost =	$                      80,000
	Less: Salvage Value	$                               -
	Net Value for Amortization	$                      80,000
	Usefule life of the Patent	10	Years
	Amortization per year = Value for Amortization / 10 years =	$                        8,000
	Amortization per year =	$                        8,000
	CALCULATION OF THE AMORTIZATION EXPENSES FOR THE YEAR 2019
	Purchase Cost	$                      80,000
	Less: Amortization for the year 2017 =	$                        8,000
	Less: Amortization for the year 2018 =	$                        8,000
	Carrying value as on Jan 01, 2019 =	$                      64,000
	Expenses for defending the patent	$                      32,800
	Total Value for amortization	$                      96,800
	Divide By	"/"By
	Balance of Amortization years	8	Years
	Amortization per Year =	$                      12,100
Date	Account tiltle and explanation	Debit	Credit
--------	Patent	$                      32,800
	To Cash		$                    32,800
	(To record the expenditure of patents)
--------	Amortization Expenses	$                      12,100
	To Accumulated Amortization - Patent		$                    12,100
	(To Record the amortization expenses)