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Vsevolod [243]
3 years ago
5

Kleen Company acquired patent rights on January 10 of Year 1 for $857,700. The patent has a useful life equal to its legal life

of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $36,000. Required: a. Determine the patent amortization expense for Year 4 ended December 31. b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. Refer to the Chart of Accounts for exact wording of account titles.
Business
1 answer:
Sidana [21]3 years ago
8 0

Answer:

a. Amortization expense for Year 4=$572,062.5/5=$114,412.50                                      

b. Adjusting entry to be recorded in respect of amortization as at  December 31, Year 4:

                                              Debit                  Credit

Amortization expense          $114,412.50

Accumulated amortization                              $114,412.50

Explanation:

Cost of patent right at Year 1=                               $857,700

Less:Accumulated amortization for three years=($321,637.5)

($857,700/8)*3

Net book value of patent rights on January 7, year 4=$536,062.5

Add: Cost to defend lawsuit related to patent right = $36,000

Total cost at start of Year 4=$572,062.5

a. Amortization expense for Year 4=$572,062.5/5=$114,412.50                                      

b. Adjusting entry to be recorded in respect of amortization as at  December 31, Year 4:

                                              Debit                  Credit

Amortization expense          $114,412.50

Accumulated amortization                              $114,412.50

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