Smith Company acquired patent rights on January 6, 2013, for $882,000. The paten

ID: 2450537 • Letter: S

Question

Smith Company acquired patent rights on January 6, 2013, for $882,000. The patent has a useful life equal to its legal life of nine years. On January 3, 2016, Smith successfully defended the patent in a lawsuit at a cost of $45,000.

A. Determine the patent amortization expense for the year ended December 31, 2016.
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B. Journalize the adjusting entry to recognize the amortization.

Required: A. Determine the patent amortization expense for the year ended December 31, 2016. B. Journalize the adjusting entry to recognize the amortization. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

Patent balance as on Jan. 1, 2016 Acquisition price on Jan 6,2013 882000 Amortisation for 3 years(882000/9)*3 294000 Balance as on Jan 1.2016 588000 Add: Cost of defending on Jan,3,2013 45000 Total to be amortised over bal. 6 yrs. 633000 So, Patent Amortisation expense for the year ended December 31,2016 633000/6= 105500 Journal Entry Debit Credit Amortisation Expense Account 105500 Patent account 105500 (To record Patent Amortisation expense for the year ended December 31,2016)

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Smith Company acquired patent rights on January 6, 2013, for $882,000. The paten

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