Question

Question 4 Martinez Products Ltd, purchased a patent on January 1, 2017, for $870,000. At the time of the purchase, the patent had a remaining legal life of 15 years. In January, 2020, Martinez spent $28,000 successfully defending the patent in court. One of the other results of the court case was the discovery that the patent would only have a remaining useful life of 9 years. Martinez's year-end was December 31. Prepare the entries on the books of Martinez Ltd. to record (a) the purchase of the patent, (b) amortization for the first year (2017), (c) the defense of the patent, and (d) amortization for 2020. (Il no entry is required, select "No Entry for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to o decimal places, e.g. 5,275.) No. Account Titles and Explanation Debit (To record the purchase of the patent.) (To record 2017 amortization.) (To record the legal defense of the patent.) (Te record 2020 amortization)

Answer 1

Journal Entries:

No.	Account Titles and Explanation	Debit	Credit
(a)	Patents	$870,000
	Cash		$870,000
	(To record the purchase of patents by cash)
(b)	Amortization Expense ($870,000/15 years)	$58,000
	Accumulated Amortization - Patents		$58,000
	(To record 2017 amortization)
(c )	Patents	$348,000
	Cash		$348,000
	(To record the legal defense of the patent)
(d)	Amortization Expense ($1,044,000/9 years * 1 year)	$116,000
	Accumulated Amortization - Patents		$116,000
	(To record 2020 amortization)
	Working notes:
	Book value of Patent in 2017	$870,000
	Less: Accumulated Amortization for 3 years from 2017 to 2019 ($870,000/15 years*3 years)	($174,000)
	Book value of the patents in 2020	$696,000
	Add: Successful defending the patent	$348,000
	Book value of the patents after successful defending	$1,044,000