Question

Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the $21.60 million cost of the patent on a straight-line basis since it was acquired at the beginning of 2012. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2016 (before adjusting and closing entries).

CH 20; What is the appropriate adjusting entry for patent amortization in 2016 to reflect the revised estimate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

record the adjusting entry for the patent amortization in 2016

Answer 1

	Debit	Credit
Amortization expense	6
Patent		6
Workings:
Cost of Patent		21.60
Annual amortization	2.40		=21.60/9
X Years of amortization	4
Amortization to date		9.60
Unamortized cost		12.00
Estimated remaining life		2
New annual amortization		6