A company purchased a patent on January 1, 2014, for $2,500,000. The patent\'s l

Question

A company purchased a patent on January 1, 2014, for $2,500,000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30, 2014, the company paid legal costs of $162,000 in successfully defending the patent in an infringement suit.

Prepare the journal entry to amortize the patent at year end on December 31, 2014. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Explanation / Answer

Amortisation of Patent at Year End

Amount has been caculated as

2500000/5 = 500000

162000/5=32400x6/12=16200

Total Amortization Expense = 500000+16200 = $156200

PARTICULARS AMOUNT($) AMOUNT($) Patent Amortization Expense 516200 To Patents 516200 (Being Patents Amorized)

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