Question

Record the following events and transactions for Leonard Company for the current year.

1. On January 2, Leonard purchased a patent for $35,000 with a remaining useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year.
2. On January 3, Leonard signed a contract to lease space in a building for 15 years. The current value of the lease payments is $840,000. Prepare the journal entry for straight-line amortization at the end of the first year.
3. On January 4, Leonard purchased a music distributor's collection of lyrics and songs for $1,425,000. The copyrights have a remaining life of another 30 years. Prepare the journal entry to amortize the copyright at the end of the first year.

Answer 1

Date	Journal Entry	Debit	Credit	Explanation
31-Dec	Amortization expense	3500		(cost of patent / life)
	To accumulated amortization on patent		3500	= 35000 / 10
	(To record amortization of patent)
31-Dec	Amortization expense	56000		(PV of lease payments / life)
	To accumulated amortization on Lease Building		56000	=840000 / 15
	(To record amortization of Lease building)
31-Dec	Amortization expense	47500		(cost of copyrights / life)
	To accumulated amortization on Copyrights		47500	= 1,425,000/ 30
	(To record amortization of Copyrights)