Brief Exercise 12-1 Sheffield Corporation purchases o patent from Phsroah Compan

Question

Brief Exercise 12-1 Sheffield Corporation purchases o patent from Phsroah Company on January 1, 2017, for $69,000. The patent has a remaining legal life of 14 years. Sheffield feels the patent will be useful for 10 years. Prepare Sheffield'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 for the account titles and enter O for the amounts.) Account Titles and Explanation entry is Debit Credit To record purchase of patents) (To record amortization of patents) Click if you would like to Show Work for this question: Work Open Show Work

Explanation / Answer

Purchase of Equipment

Journal Entry

Patent       $69,000

       Bank       $69,000

Patents are amortized in their useful life on a straight – line basis. As the useful life is 10 years, Amortization expenses will be as follows

Purchase price / Useful life

= $69,000 / 10

= $6,900

Journal Entry

Amortization Expense                      $6,900

       Accumulated amortization – Patent / Patent       $6,900

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