Question

Ayayai Corporation purchases a patent from Blossom Company on January 1, 2020, for $40,000. The patent has a remaining legal life of 12 years. Ayayai feels the patent will be useful for 10 years. Prepare Ayayai’s journal entries to record the purchase of the patent and 2020 amortization

Answer 1

Step-by-step explanation:

The journal entries are shown below:

1. Patent A/c Dr $40,000

To Cash A/c $40,000

(Being patent is purchase in cash is recorded)

2. Amortization expense A/c Dr $4,000

To Patent A/c $4,000

(Being amortization expense is recorded)

The computation is shown below:

= Patent ÷ useful life

= $40,000 ÷ 10 years

= $4,000