Van Frank Telecommunications has a patent on a cellular transmission process. Th

Question

Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the $20.70 million cost of the patent on a straight-line basis since it was acquired at the beginning of 2012. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2016 (before adjusting and closing entries). What is the appropriate adjusting entry for patent amortization in 2016 to reflect the revised estimate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)

Explanation / Answer

Remaining cost of patent which have to amortised:

=(20,700,000/4)×5

=$25,875,000

Remain useful life of patent=6years -4 years

=2 years

So Amortization will be=$25,875,000/2

=$12,937,500

Entry will be:

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