Question

During 2016, Marigold Corporation spent $154,080 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2016, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $28,080 related to the patent were incurred as of October 1, 2016.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
2018	Amortization expense	2780
	Patents		2780
	(To record amortization expense)

Working:

Amortization expense from Jan. 1, 2018 to May 31, 2018 = $2808 x 5/12 = $1170

Carrying value of Patents on June 1, 2018 = ($28080 - $702 - $2808 - $1170) + $9720 = $33120

The carrying value will be amortized over the revised estimated useful life of 12 years.

Annual amortization = $33120/12= $2760

Amortization expense from June 1, 2018 to Dec. 31, 2018 = $2760 x 7/12 = $1610

Amortization expense for 2018 = $1170 + $1610 = $2780

Account Titles and Explanation	Debit	Credit
Amortization expense	14375
Patents		14375

Working:

Carrying value of Patents on Jan. 1, 2020 = $33120 - $1610 - $2760 = $28750

The carrying value will be amortized over 2020 and 2021.

Amortization expense for 2020 and 2021 each = $28750/2 = $14375