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ID: 2720196 • Letter: W

Question

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Date

Account Titles and Explanation

Debit

Credit

2010

(To record research and development expenses)

2010

(To record legal expenses)

2010

(To record amortization expense)

2011

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Date

Account Titles and Explanation

Debit

Credit

2012

(To record patents)

2012

(To record amortization expense)

2013

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Account Titles and Explanation

Debit

Credit

During 2010, George Winston Corporation spent $168,770 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2010, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $39,720 related to the patent were incurred as of October 1, 2010.

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Explanation / Answer

Computation of Amortization Expense to be recorded in 2012

Amortization Expense from Jan 1,2012 to May 31,2012 = (39720/10)*(5/12) = $1,655

Amorgtization Expense from Jun 1,2012 to Dec 31, 2012 = [(39720-993-3972-1655+12040)/12]*(5/12) = $1,567

Total Amortization for 2012 = 1567 + 1655 = $3,222

The Journal Entries are shown below

2012 Patents 12040

Cash 12040

2012 Amortization Expense 3,222

Patents 3,222

2012 Amortization Expense 3,762

Patents 3,762

Journal Entries for 2014 and 2015

Book Value on Jun 1,2012 = 45140

less:- Amortization for remaining 2012 = 1567

less:- Amortization for 2013 = 3762

Book Value as on Jan 1,2014 = 39,811

2014 Amortization Expense (39811/2) 19,905

Patents 19,905

2015 Amortization Expense (39811/2) 19,905

Patents 19,905