norcia company which uses the allowance method norcia company which uses the all
ID: 2508442 • Letter: N
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norcia company which uses the allowance method norcia company which uses the allowance method norcia company which uses the allowance method norcia company which uses the allowance method nment: Chapter 9 Assignment Instructor Assignment Score: 98.21% Save Exit Submit Assignment for Grading Question 12 of 14 Check My Work ons 2Exercise 9-12 Exercise 9-12 Accounting for a Patent At the beginning of the fiscal year, David Company purchased for $1,030,000 a patent that applies to the manufacture of a unique tamper-proof id for medicine bottles. David incurred legal costs of $450,000 in successfully defending use of the lild by a competitor, David estimated that the patent would be valuable for at least ten years. o During the first two years of operations, David successfully marketed the lid. At the beginning of the third year, a study appeared in a consumer magazine showing that children could in fact remove the lid. As a result, all orders for the lids were canceled, and the patent was rendered worthless Hide a. Prepare the journal entry to record the purchase of the petent. 1030000 Patent 1030000 Cash To record purchase of patent Hide FeedbackExplanation / Answer
C. Amortization of patent over its useful life of 10 yrs
$1030000/10=$103000
Amortization expense a/c Dr. $103000
To Patent a/c $103000
D. Writing off patent as useless.
WDV of patent after 2 yrs=$1030000-$103000*2yrs=$824000
Loss on writing off patent a/c dr. $824000
To patent a/c. $824000
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