business-accounting question. thanks
Prepare the following journal entries and
calculations:
(a) | A patent that was acquired for $820,000 at the beginning of the current year expires in 15 years and is expected to have value for 6 years. Present the adjusting entry to amortize the patent for the current year. |
(b) | Mineral rights on an ore deposit estimated at 8,000,000 tons of ore were acquired for $5,600,000. Present the adjusting entry to record depletion for the current year, during which 350,000 tons of ore were removed. |
Accounts title | Debit | Credit | |||||
Amortization expense | 136,667 | ||||||
Patent (820000÷6) | 136,667 | ||||||
Note: patent is amortized for lesser of its legal life or economic life, legal life is expiry , and economic life is useful life. | |||||||
Depletion expense | 24,500 | ||||||
Mineral rights (5600000/80000000) x 350000 | 24,500 | ||||||
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