Question

Kleen Company acquired patent rights on January 10 of Year 1 for $424,000. The patent has a useful life equal to its legal life of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $21,000.

If required, round your answer to the nearest dollar.

a. Determine the patent amortization expense for the Year 4 ended December 31.
$

b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization.

Answer 1

a
Patent cost	424000
Divide by estimated useful life	8
Annual amortization	53000
Amortization for 3 years	159000	=53000*3
Book value of Patent at Year 4	265000	=424000-159000
Add: Lawsuit cost	21000
Total cost of Patent	286000
Divide by remaining useful life	5
Patent amortization expense for the Year	57200
b
	Debit	Credit
Amortization expense	57200
Patents		57200