en Assignment These are selected 2017 transactions for Martinez Corporation: Jan
ID: 2583201 • Letter: E
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en Assignment These are selected 2017 transactions for Martinez Corporation: Jan. 1 Purchased a copyright for $162,500. The copyright has a useful ife of 5 years and a remaining legal ife of 33 years. Mar. 1 Purchased a patent with an estimated useful life of 6 years and a legal life of 21 years for $96,840. Sept. 1 Purchased a small company and recorded goodwill of $150,950. Its useful life is indefinite, Prepare all adjusting entries at December 31 to record amortization required by the events. (Credit account titles are automatically Indented the events. (Credit account titles are automatically Indented when the amount is Date Account Titles and Explanation Debit Credit Dec. 31 (To record amortization of Copyrights) Dec. 31 (To record amortization of Patents) Dec. 31 (To record amortization of Goodwill) Open Shos Work Click if you would like to Show work for this question:Explanation / Answer
Point 1 At the time of purchase of Copyright Date Account Name Debit Credit 1/1/2017 Copyright A/c $ 167,500 To Cash/Bank A/c $ 167,500 At the time of amortization 31/12/2017 Amortizaton Expenses $ 33,500 To Accumulated Amortization $ 33,500 31/12/2017 Accumulated Amortization $ 33,500 To Copyight A/c $ 33,500 Calculation of Amortization Expenses If the company follows Straight Line method of Amortization Useful life of Copyright for the company = 5 Years Hence, Amortization expenses of Copyright = 167500 5 = $ 33,500 Point 2 At the time of purchase of Patent Date Account Name Debit Credit 1/3/2017 Patent A/c $ 96,840 To Cash/Bank A/c $ 96,840 At the time of amortization 31/12/2017 Amortizaton Expenses $ 16,140 To Accumulated Amortization $ 16,140 31/12/2017 Accumulated Amortization $ 16,140 To Patent A/c $ 16,140 Calculation of Amortization Expenses If the company follows Straight Line method of Amortization Useful life of Copyright for the Patent = 6 Years Hence, Amortization expenses of Patent = 96840 6 = $ 16,140 Point 3 At the time of purchase of small compny Date Account Name Debit Credit 1/9/2017 Goodwill A/c $ 150,950 To Cash/Bank A/c $ 150,950 Explanation: Goodwill is an Intangible Assets with an indefinite life. The intangible Assets with an indefinite life are not amortised, but is tested for impairement and written down to its recoverable amount. Impairement Loss = Carrying Value - Recoverable Amount
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