New Tech Company acquired a patent on January 1, 2017 for $35,000. The residual value of the patent is $0. The patent is expected to benefit New Tech Company for 5 years
After using the patent one year, it was discovered that the patent would only be useful for 3 more years.
Required:
1. Prepare the journal entry to record the acquisition of the patent. Omit explanations.
2. Prepare the adjusting journal entry at December 31, 2017. Omit explanation.
3. Prepare the adjusting journal entry at December 31, 2018. Omit explanation.
Date Account DR CR
Jan. 1, 2017 Patent 35,000
Cash 35,000
Dec. 31, 2017 Amortization Expense—Patent 7,000
Patent 7,000
$35,000 ÷ 5 = $7,000
Dec. 31, 2018 Amortization Expense—Patent 9,333
Patent 9,333
($35,000 - $7,000 )÷ 3 = $9,333
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