Accounting for Intangible Assets and Natural Resources On June 1, ABC Inc. purch

Question

Accounting for Intangible Assets and Natural Resources

On June 1, ABC Inc. purchased a patent for $75,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year assuming ABC Inc. follows a calendar year.

On January 4, ABC Inc. purchased a music distributor's collection of lyrics and songs for $425,000. The copyrights are expected to last another 10 years. Prepare the journal entry to amortize the copyright at the end of the first year.

ABC, Inc.

Journal Entries

Date

Account Name

Debit

Credit

1-Jun

a)

4-Jan

b)

ABC, Inc.

Journal Entries

Date

Account Name

Debit

Credit

1-Jun

a)

4-Jan

b)

Explanation / Answer

Solution:

ABC Inc. Journal Entries Date Particulars Debit Credit 31-Dec Amortization expense Dr ($75,000/10*6/12) $3,750.00          To Accumulated amortization - Patent $3,750.00 (To record amortization of patent) 31-Dec Amortization expense Dr ($425,000/10) $42,500.00          To Accumulated amortization - Copyright $42,500.00 (To record amortization of Copyright)

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