Lawrence Agency purchased a patent in on January 1, 2015 for $40,000 and the pat

Question

Lawrence Agency purchased a patent in on January 1, 2015 for $40,000 and the patent had a useful life of 5 years. On January 1, 2017, Lawrence Agency successfully defended a lawsuit for the patent, legal costs totaled $20,000, paid in cash " Required: Record the following j ournal entries a. Record the purchase of the patent for 2015- b. Record the amortization for 2015 and 2016 c. Record the legal fees for 2017 d. Record the amortization for 2017 e. What is the ending balance in the patent account?+

Explanation / Answer

Journal entries: Date Accounts title and explanations Debit $ Credit $ Jan12015 Patents right Dr. 40000      Cash Account 40000 Dec 31 2015 Amortization expense Dr. 8000     Patents rights (40000/5) 8000 Dec 31 2016 Amortization expense Dr. 8000     Patents rights (40000/5) 8000 Jan1 2017 Patents rights Dr. 20,000     Cash Account 20,000 Dec 312017 Amortization expense Dr. 14667      Patents rights 14667 Note:Amorization expense in 2017: Ooriginal cost 40,000 Amortization of 2 years 16000 Book value on jan1 2017 24000 Add: Legal expense 20000 Total Vvalue fromm 2017 44000 Remaining life (5-2) years 3 Annual amortization in 2017 14666.67 Ending Amount of Patents in 201: Book value in 2017 24000 Add: Legal expense 20000 Book value after legal fees 44000 Less: Annual Amortizatin 14667 Book value of Patents 29333

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