Answer:
(A)
Development 170,000 debit
Cash 170,000 credit
to recognize development cost
(B)
New Age Piano patent 188,000 debit
Development 170,000 credit
Cash 18,000 credit
to record the patent of the new product
(C)
Amortization expense 4,700 debit
New Age Piano patent 4,700 credit
to record amortization for the year 2013
(D)
Amortization expense 18,800 debit
New Age Piano patent 18,800 credit
to record amotization for the year 2014
Explanation:
(A) The development cost are capitalized
(B) We should capitalize all the cost necesary to the use of the patent
So we add both, the development and the legal fees
170,000 development and research
18,000 legal fees
188,000 total
(C)
<u>Striaght-line amortization </u>
188,000 / 10 year = 18,800 amortization per year
We use the useful life, not the legal life, as the product will be used for this period.
partial amortization for 2013
18,800 x 3/12 = 4,700
(D)
amortization for 2014
18,800 complete year
