Baker Company purchased for $80,000 a patent on January 1, 2011. The patent has an expected...
Baker Company purchased for $80,000 a patent on January 1, 2011. The patent has an expected life of 8 years. In 2016, due to changes in the economy, Baker has to review the patent for impairment. The estimated fair value of the patent on December 31, 2016, was $18,000. Prepare the journal entry for 2016 amortization and journal entry for Baker to record the impairment of the Patent (if there is one). Be sure to show all your work!
Homework Answers
| Book value of Patents as on December 31, 2016 | ||||||
| Patent : $20000[ $ 80,000 – ($ 80,000 *6 years/8 years) ] | ||||||
| 1. Baker estimates that the fair value of the patent is $18000 | ||||||
| Journal Entry | ||||||
| Date | Account Title | Debit-$ | Credit-$ | |||
| Impairment charges on patent | 2000 | ($20000 - $ 18000) | ||||
| Patent | 2000 | |||||
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