On January 2, 2016, Alpha Company purchased a patent for $38,500 plus $2,000 in legal fees....
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."
Homework Answers
| Date | General Journal | Debit | Credit |
| Dec. 31, 2016 | Amortization expense | 6750 | |
| Patent | 6750 |
Amortization expense = ($38500 + $2000)/6 = $$40500/6 = $6750
The patent is capitalized at its purchase cost plus legal fees and it is amortized over the legal life or useful life whichever is lesser.
The amortized amount is generally directly credited to the Patent account without maintaining a separate accumulated amortization account.
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