On June 30,2011, Mobley Corporation acquired a patent for $4millon. The patent w

Question

On June 30,2011, Mobley Corporation acquired a patent for $4millon. The patent was estimated to have an eight-year life and no residual value. Mobley uses the straight -line method of amortization for intangible assets. At the beginning of January 2013, Mobley successfully defended its patent against infringement. Litigation costs totaled $650,000. Required: 1.Calculate patent amortization for 2011 and 2012 2. Prepare the journal entry to record the 2013 litigation costs. 3.Calculate amortization for 2013. On June 30,2011, Mobley Corporation acquired a patent for $4millon. The patent was estimated to have an eight-year life and no residual value. Mobley uses the straight -line method of amortization for intangible assets. At the beginning of January 2013, Mobley successfully defended its patent against infringement. Litigation costs totaled $650,000. Required: 1.Calculate patent amortization for 2011 and 2012 2. Prepare the journal entry to record the 2013 litigation costs. 3.Calculate amortization for 2013. Required: 1.Calculate patent amortization for 2011 and 2012 2. Prepare the journal entry to record the 2013 litigation costs. 3.Calculate amortization for 2013.

Explanation / Answer

1.

Calculate patent amortization for 2011 and 2012:

$ 4,000,000/8 = $500,000

2.

Date Accounts titles Debit $ Credit$

Patent 650,000

Cash 650,000

3.

Amortization for 2013 = ($4,000,000 + $ 650,000)/6 = $ 775,000

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