Answer:
a. The patent amortization expense for Year 4 ended December 31 is $357,600.
b. Debit Amortization expense for $357,600; and Credit Accumulated amortization - Patent for $357,600.
Explanation:
Patent acquisition cost = $2,800,000
Number of years to use for amortization patent acquisition cost = Useful life equal = Legal life = 8
Lawsuit at a cost = $38,000
Number of years to amortize the lawsuit cost = Number of years to use for amortization – Numbers of years from January Year 1 to January Year 4 = 8 – 3 = 5
Therefore, we can now have:
a. Determine the patent amortization expense for Year 4 ended December 31.
Patent amortization expense for Year 4 = (Patent acquisition cost / Number of years to use for amortization patent acquisition cost) + (Lawsuit cost / Number of years to amortize the lawsuit cost) = ($2,800,000 / 8) + ($38,000 / 5) = $357,600
Therefore, the patent amortization expense for Year 4 ended December 31 is $357,600.
b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization.
The journal entry will look as follows:
<u>Details Debit ($) Credit ($) </u>
Amortization expense 357,600
Accumulated amortization - Patent 357,600
<u><em>(To record Patent amortization.) </em></u>
