Question

assume LIFOJ, and uses 20 tTenovaurniture in the company headquarters 7. Antex SpA issues 80000 shares of common stock (par value2) to acquire a patent. An independent appraiser determines that the value of the patent is 320,000. The patent has a legal life of 15 years remaining, and the company assigns it a useful life of 10 years, no residual value. After two years, an unexpected technological development leads to the determination of a recoverable amount of the patent of 198,000.

How should I journalize this?

Answer 1

Journal entries are as below

a) On Acquisition of Patent

Patent A/c Dr......320000

   To Share capital A/c ...........160000 (80000 shares at par value of 2)

   To Security Premium...........160000

(Being patent acquired)

b) At end of year 1

Depreciation and amortisation A/c Dr.............32000

   To Accumulated depreciation............................32000

and then

Accumulated depreciation Dr.......................32000

   To Patent A/c...................................................32000

(Being Amortisation of patent for year 1 on useful life of 10 years)

b) At end of year 2

Depreciation and amortisation A/c Dr.............32000

   To Accumulated depreciation............................32000

and then

Accumulated depreciation Dr.......................32000

   To Patent A/c...................................................32000

(Being Amortisation of patent for year 2 on useful life of 10 years)

After 2 year

Loss on Impairment of patent Dr.............58000

To Patent A/c.................................................58000

(Being loss in impairment of patent recoreded in books)