Answer:
(a) Entry for purchase of patent :
Patent a/c debit $600,000.
To Cash / Bank A/c. $600,000.
(b) Amortisation : (legal protection for 20 years) >> 600,000/20 = 30,000 per annum
Amortisation expenses -Patents $30,000
To Patents account $30,000
(c) Impairment Loss on Patents ac. debit 270,000 (see calculations below)
To Patents account 270,000
(Value of patents at end of 4 years = 600000-120000=480,000)
Expected future value = 210,000
Impairment = 480,000-210,000=270,000
