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Alina [70]
3 years ago
12

Kleen Company acquired patent rights on January 10 of Year 1 for $400,000. 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 $20,000.
Required:
a. Determine the patent amortization expense for the Year 4 ended December 31.
b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization.
Business
1 answer:
inessss [21]3 years ago
6 0

Answer:

a. Particulars                                  Amount  

Patent cost                                     $400,000  

Less: Amortization for 3 years      <u>$150,000 </u> ($400,000*3/8)

Book value at the end of year 3  $250,000

Addition during Year 4                  <u>$20,000  </u>

Total book value                            <u>$270,000</u>

Patent amortization expense for the Year 4 = Total book value / Remaining life

Patent amortization expense for the Year 4 = $270,000 / 5

Patent amortization expense for the Year 4 = $54,000

b.                       Adjusting Entry

Date  Account titles                   Debit       Credit

         Amortization expense    $54,000

                Patents                                       $54,000

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3.55 years

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In terms of the tax formula applicable to individual taxpayers, which of the following statements, if any, is correct?
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The Bloomfield Corporation sells three items of inventory: rulers, mechanical pencils, and notebooks. The company begins operati
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             Value of inventories

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2. Pencils = 70*$8 =            $560

3. Notebooks = 120*$7 =    $840

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