Crystal Company summarized the following transactions pertaining to its patent. 2012 Spent P250, 000 for the research and development of the patent 2013 Jan. 1 Paid P60, 000 to apply for and obtain right to the patent. The useful life of the patent is 10 years. 2014 Jan. 1 Purchased for P600, 000 a new patent that is expected to prolong the life of the original patent by 6 years. 2015 Dec. 31 A competitor obtained rights to a patent which rendered the entity’s patent obsolete Required: Prepare all entries relating to the patent from 2012 to 2015. rules of answering the problem
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Crystal Company summarized the following transactions pertaining to its patent.
2012 Spent P250, 000 for the research and development of the patent
2013
Jan. 1 Paid P60, 000 to apply for and obtain right to the patent. The useful life of the patent is 10 years.
2014
Jan. 1 Purchased for P600, 000 a new patent that is expected to prolong the life of the original patent by 6 years.
2015
Dec. 31 A competitor obtained rights to a patent which rendered the entity’s patent obsolete
Required:
Prepare all entries relating to the patent from 2012 to 2015.
rules of answering the problem
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