For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: a. A patent with a 10-year remaining legal life was purchased for $350,000. The patent will be commercially exploitable for another eight years. b. 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. C. 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 To record patent amortization. b. To record patent amortization. C. To record franchise amortization.
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense: a. A patent with a 10-year remaining legal life was purchased for $350,000. The patent will be commercially exploitable for another eight years. b. 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. C. 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 To record patent amortization. b. To record patent amortization. C. To record franchise amortization.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Measuring the change in percentage of an economic variable with respect to change in a different economic variable is known as elasticity. This change in percentage results in a change in price concerning changes in other factors. In simple terms, when one factor brings a change to another factor, it is called elasticity.
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Transcribed Image Text:Amortization Expense
For each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:
a. A patent with a 10-year remaining legal life was purchased for $350,000. The patent will be commercially exploitable for another eight years.
b. 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.
c. 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.
To record patent amortization.
b.
To record patent amortization.
C.
To record franchise amortization.
Transcribed Image Text:ef.
Description
Amortization Expense - Franchises
Amortization Expense - Patents
Franchises
Patents
To record patent amortization.
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