Question

Amortization Entries Kleen Company acquired patent rights on January 10 of Year 1 for $344,000. 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 $17,00 If required, round your answer to the nearest dollar. a. Determine the patent amortization expense for the Year 4 ended December 31. $3,581,50 X Feedback Check My Work b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. Amortization Expense-Patents 3,581,500 X Patents 3,581,500 x

Answer 1

a) Amortization Expense:
Cost of Patent in year 1	$344,000
Less: Accumulated amortization at the end of year 3 ($344,000/8 years * 3 years)	($129,000)
Carrying value of patents at the end of year 3	$215,000
Add: Successfully defend the patents	$17,000
Carrying value of patents at the beginning of year 4	$232,000
Amortization Expense in Year 4 ($232,000/5 years * 1 year)	$46,400

Therefore, amortization expense for patents in year 4 is $46,400.

b) Adjusting Entry:
Account Titles and Explanation	Debit	Credit
Amortization Expense - Patents	$46,400
Patents		$46,400
(To record the amortization in the year 4)

Note: Amount successfully defend the patent in a lawsuit is $17,000 but one zero is missed but if we see the coma after 17, we can understand that it is $17,000.