Amortization Expense For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: A patent with a 10-year remaining legal life was purchased for $350,000. The patent will be commercially exploitable for another eight years. A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $52,300 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 10 years and is currently worth $400,000. A franchise granting exclusive distribution rights for a new solar water heater within a three-state area for five years was obtained at a cost of $70,000. Satisfactory sales performance over the five years permits renewal of the franchise for another three years (at an additional cost determined at renewal). General Journal Ref. Description Debit Credit a. Answer Answer Answer Answer Answer Answer To record patent amortization. b. Answer Answer Answer Answer Answer Answer To record patent amortization. c. Answer Answer Answer Answer Answer Answer To record franchise amortization.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Amortization Expense

For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:

A patent with a 10-year remaining legal life was purchased for $350,000. The patent will be commercially exploitable for another eight years.
A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $52,300 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 10 years and is currently worth $400,000.
A franchise granting exclusive distribution rights for a new solar water heater within a three-state area for five years was obtained at a cost of $70,000. Satisfactory sales performance over the five years permits renewal of the franchise for another three years (at an additional cost determined at renewal).

General Journal
Ref.	Description	Debit	Credit
a.	Answer	Answer	Answer
	Answer	Answer	Answer
	To record patent amortization.
b.	Answer	Answer	Answer
	Answer	Answer	Answer
	To record patent amortization.
c.	Answer	Answer	Answer
	Answer	Answer	Answer
	To record franchise amortization.

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