Question

On January 2, 2016, Alpha Company purchased a patent for $38,500 plus $2,000 in legal fees. On that date, the patent had a remaining legal life of 13 years. Alpha Company expects to use the patent for six years. Use this information to prepare the General Journal entry (without explanation) for December 31, 2016 end of the year adjusting entry. If no entry is required then write "No Entry Required."

Answer 1

Solution: 1
	Calculation of amortization Cost of Patent Per Year
	Purchase Cost of Patent	$                     38,500
	Add: Lega; Fees	$                       2,000
	Total Cost of Patent	$                     40,500
	Divide By	"/" By
	Expecting use period	6.00	Years
	Amortization Cost Per Year	$                       6,750	Per Year
Date	Account Title and Explanation	Debit	Credit
Dec 31. 2016	Amortization Expenses	$6,750
	Patent		$6,750
	(To Record the Amortization Expensess)
Solution: 2
Working Notes:1
	CALCULATION OF NET ASSETS
	Particulars	Amount	Amount
	Cash	$                     75,000
	Inventory	$                 2,75,000
	Property, Plant & Equipment	$                 7,50,000
	Total Assets		$    11,00,000
	Less: Liabilities
	Account Payable	$                 3,50,000
			$       3,50,000
	Net Assets Acquired		$       7,50,000
	CALCULATION OF THE GOODWILL ON THIS TRANSACTION
	Goodwill                                     =	Value of Business Purchase	"-"	Net Assets
	Goodwill                                     =	$               12,50,000	"-"	$                  7,50,000
	Goodwill                                     =	$                 5,00,000
	Answer = Goodwill = $ 500,000