Brief Exercise 12-2 Ayayai Corporation purchases a patent from Blossom Company o

Question

Brief Exercise 12-2

Ayayai Corporation purchases a patent from Blossom Company on January 1, 2017, for $71,000. The patent has a remaining legal life of 16 years. Ayayai feels the patent will be useful for 10 years. Assume that at January 1, 2019, the carrying amount of the patent on Ayayai’s books is $56,800. In January, Ayayai spends $20,000 successfully defending a patent suit. Ayayai still feels the patent will be useful until the end of 2026.

Prepare the journal entries to record the $20,000 expenditure and 2019 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 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

(To record expenditure of patents)

(To record amortization expense)

Explanation / Answer

Account Titles and Explanation Debit Credit Patents $20,000 Cash $20,000 Amortization Expense $9,600 Patents[($56,800 + $20,000) x 1/8] $9,600

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