Question

Sheridan Corporation purchases a patent from Sunland Company on January 1, 2020, for $95,760. The patent...

Sheridan Corporation purchases a patent from Sunland Company on January 1, 2020, for $95,760. The patent has a remaining legal of 16 years. Sheridan feels the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Sheridan's books is $76,608. In January, Sheridan spends $22,800 successfully defending a patent suit. Sheridan still feels the patent will be useful until the end of 2029.

Prepare Sheridan's journal entries to record the amortization for 2020 and 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

2020

2022
Business   Accounting   
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Answer #1
Date Account titles and explanation Debit Credit
2020 Amortization expense (95760/10) 9576
Patent 9576
(To record amortization expense)
2022 Amortization expense (Note:1) 12426
Patent 12426
(To record amortization expense)
Note:1
Carrying amount of patent as on Jan 1,2022=$ 76608
Amount spent to defend patent=$ 22800
Remaining useful life=10-2=8 years
Amortization expense for 2022=(76608+22800)/8=$ 12426
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