Question

Grouper Corporation purchases a patent from Sheridan Company on January 1, 2017, for $46,000. The patent has a remaining legal life of 16 years. Grouper feels the patent will be useful for 10 years.Prepare Grouper’s journal entries to record the purchase of the patent and 2017 amortization

Answer 1

Answer:

We first register the purchase of the patent:

Account                  Debit           Credit

Cash                                          $46,000

Patent                 $46,000

Now we register the amortization for the first year. Because the useful life is 10 years, then, each year the patent will lose $4,600 of its value ($46,000 / 10 = $4,600)

Account                  Debit            Credit

Amortization          $4,600

Patent                                         $4,600