Answer:
Explanation:
Workings
Note that intangible assets are amortized over the useful lifetime and not the legal life.
Copyright
Useful life = 6 years
Date of purchase = January 1
Timeline = 12 months / 1 year
Purchase price = 120,000
Amortization charges = 120,000 / 6 = 20,000
Patent
Useful life = 4
Date of purchase = Mar 1
Timeline = 10 months (March - December )
Purchase price = 54,000
Amortization charges = 54000/4 *10/12 = 11,250
Small company
Goodwill are not amortized as it has an indefinite lifetime but annually tested for impairment
Adjusting entries
Date Accounting title Debit Credit
a) Amortization of Copyright
December 31 Amortization expenses 20,000
Copyright 20,000
b) Amortization of patent
December 31 Amortization expenses 11,250
Patent 11,250
