Question

Martinez, Inc. acquired a patent on January 1, 2016 for $40,500 cash. The patent was estimated to have a useful life of 10 years with no res idual value. On December 31, 2017, before any adjustments were recorded for the year, management determined that the remaining useful life was 7 years (with that new estimate being effective as of January 1. 2017), On June 30.2018, the patent was s entry is required for a transaction/event, select "No Journal Entry Required field.) old for $25,500. (lf no " in the first account Required a. Prepare the journal entry to record the acquisition of the patent on January 1, 2016 View transaction list Journal entry worksheet Record the entry for acquisition of patent. Note: Enter debits before credits Date General Journa Debit Credit January 01 2016 Record entry Clear entry Viow gereral jounal

Answer 1

1 & 2)

Date	Account title	Debit	credit
1 jan 2016	Patent	40500
	cash		40500
	[Being patent acquired for cash]
31 Dec 2016	Amortization expense	4050
	Accumulated amortization -Patent		4050
	[being amortization expense for year recorded : 40500/10]

C)Book value at beginning of January 1 2017 = cost -accumulated amortiation

                                    = 40500 -4050

                                    = 36450

amortization expense for 2017 = Carrying value / remaining useful life

                                        = 36450 /7

                                        = $ 5207 rounded

d)Amortization expense from 1 Jan 2018 -30 June 2018 = 5207*6/12= 2603.5 (rounded to 2604)

Total accumulated amortization till date = 4050+ 5207+ 2604 = 11861

carrying value as on 30 June 2018 = 40500-11861= 28639

Gain /(loss) on sale = 25500-28639

                     = - 3139 loss

e)

Date	Account tilte	Debit	credit
30 June 2018	cash	25500
	Accumulated amortization -patent	11861
	loss on sale of patent	3139
	Patent		40500