Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017,
ID: 2572979 • Letter: I
Question
Indigo Corporation purchases a patent from Sandhill Company on January 1, 2017, for $57,000. The patent has a remaining legal life of 16 years. Indigo feels the patent will be useful for 10 years. Assume that at January 1, 2019, the carrying amount of the patent on Indigo’s books is $45,600. In January, Indigo spends $37,600 successfully defending a patent suit. Indigo still feels the patent will be useful until the end of 2026.
Prepare the journal entries to record the $37,600 expenditure and 2019 amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation
Debit
Credit
Account Titles and Explanation
Debit
Credit
(To record expenditure of patents) (To record amortization expense)Explanation / Answer
Date Accounts and Explanation Debit Credit 1/1/2019 Legal fees - patent 37600 Cash 37600 ( To record the payment of legal fee for depending a patent suit) 31-12-2019 Amortization Expense: Patents 10400 Accumulated amortization 10400 ( To record the amortization Expense) (57000/10+37600/8) = 10400