Brief Exercise 12-1 Bramble Corporation purchases a patent from Cullumber Compan

Question

Brief Exercise 12-1 Bramble Corporation purchases a patent from Cullumber Company on January 1, 2017, for $69,000. The patent has a remaining legal life of 12 years. Bramble feels the patent will be useful for 10 years. Prepare Bramble's journal entries to record the purchase of the patent and 2017 amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" fo the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit To record purchase of patents)

Explanation / Answer

Date Accounts Titles Dr. Cr. 12 - 1 1 Jan ,2017 Patents 69000 To cash 69000 [To record purchase of patents] 31 Dec,2017 Patent Amortization expense [$69000 / 10 years] 6900 To Patents 6900 [To record amortization of patents] 12 -2 2019 Patents 37600 To cash 37600 [To record expenditure of patents] Patent Amortization expense [(52800+37600) / (10 years - 2 years] 11300    To Patents 11300 [To record amortization of patents] 12 -4 1,April 2017    Franchises 67200 To cash 67200 31 Dec2017   Amortization expense [$67200 * 9 months / 72 months] 8400 To Franchises 8400 12 - 7   No entry is required Note:- Fair value of $1010000 is greater than the carrying value of $760000. Therefore, there is no impairment loss of goodwill

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