Answer:
Please see below the journal entries of Ayayai Corporation for the year ending 2016 and 2017 respectively.
Explanation:
Ayayai Corporation
Journal Entries
For the Year ending 2016
Debit: Research & Development Expense $144,000
Credit: Cash $144,000
To record research and development expense.
Debit: Patent $17,400
Credit: Cash $17,400
To record legal cost relating to Patent.
Debit: Amortization Expense $435
Credit: Patent $435
To record amortization expense for the pro rated year.
Ayayai Corporation
Journal Entries
For the Year ending 2017
Debit: Amortization Expense $1,740
Credit: Patent $1,740
To record amortization expense for year.
<em>AMORTIZATION EXPENSE CALCULATION:</em>
Legal Cost = $17,400
Useful Life = 10 Years
Amortization Expense = Legal Cost / Useful Life
Amortization Expense = $17,400 / 10
Amortization Expense = $1,740 per year
But since in 2016 the patent was obtained on October 1, so Ayayai Corporation will have to pro rate the Amortization Expense in 2016 as below:
Amortization Expense = Annual Amortization Expense x No. of months / Total no. of months
Since patent was obtained in October so the No. of months is '3'
Amortization Expense = $1,740 x 3 / 12
Amortization Expense = $435
