Amortization ExpenseFor each of the following unrelated situations, calculate the annual amortization expense and prepare a journal entry to record the expense:A patent with a 15-year remaining legal life was purchased for $756,000. The patent will be commercially exploitable for another six years. A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $88,200 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 15 years and is currently worth $720,000. A franchise granting exclusive distribution rights for a new wind turbine within a three-state area for four years was obtained at a cost of $72,000. Satisfactory sales performance over the four years permits renewal of the franchise for another four years (at an additional cost determined at renewal).

Patent Amortization: The annual patent amortization expenses are equal to the value of a patent is…

Answered: For each of the following unrelated…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 15-year remaining legal life was purchased for $756,000. The patent will be commercially exploitable for another six years.
A patent was acquired on a device designed by a production worker. Although the cost of the patent to date consisted of $88,200 in legal fees for handling the patent application, the patent should be commercially valuable during its entire remaining legal life of 15 years and is currently worth $720,000.
A franchise granting exclusive distribution rights for a new wind turbine within a three-state area for four years was obtained at a cost of $72,000. Satisfactory sales performance over the four years permits renewal of the franchise for another four years (at an additional cost determined at renewal).

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