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Vsevolod [243]
3 years ago
10

Murphy Printers ​(MP) manufactures printers. Assume that MP recently paid $ 500 comma 000 for a patent on a new laser printer. A

lthough it gives legal protection for 20​ years, the patent is expected to provide a competitive advantage for only eight years.
Requirements
1. Assuming the​ straight-line method of​ amortization, make journal entries to record​ (a) the purchase of the patent and​ (b) amortization for the first full year.
2. After using the patent for four ​years, MP learns at an industry trade show that another company is designing a more efficient printer. On the basis of this new​ information, MP​ decides, starting with year 5​, to amortize the remaining cost of the patent over two remaining​ years, giving the patent a total useful life of six years. Record amortization for year 5.

Business
1 answer:
SVEN [57.7K]3 years ago
6 0

Answer: The answer is given below

Explanation:

1. The journal entries to record​ the purchase of the patent and​ the amortization for the first full year has been solved and attached.

2. The amortization expense of he 4 years will be:

= $62500 × 4

= $250,000

Therefore, the book value of the patent will be:

= Cost of the patent - amortization expense

= 500,000 - 250,000

= $250,000

Amortization for year 5 = Book value/Estimated useful life remaining

= 250,000/2

= $125,000

The journal for the amortization expense for year 5 has been attached

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