Question

On October 1, 20X1, Lux Entity (LE) acquired a patent and $10,000 cash in exchange for...

On October 1, 20X1, Lux Entity (LE) acquired a patent and $10,000 cash in exchange for a license with a carrying amount of $20,000 (cost $30,000) and a fair value $15,000. The exchange is deemed to have commercial substance. Give the journal entry to record the exchange.

On July 1, 20X1, LE purchases a license that expires in five years for $10,000. LE knows, however, that they will have to purchase a new license at the end of two years because of plans to change their service lines. It is expected that the licenses will be able to be sold for $5,000 at the end of the two years. Give the journal entries to record the purchase of the license and amortization of the license in 20X1 and 20X2.

On January 1, 20X5, LE sells a copyright for $10,000. The copyright has a carrying value of $8,000 ($20,000 cost less $12,000 accumulated amortization). Give the entry to record the sale of the copyright.

Homework Answers

Answer #1
Date Account Title Debit Credit
20X1
Oct.1 Cash 10000
Patent(Bal.fig.) 10000
Accumulated amortisation-License 10000
License 30000
20X1
1-Jul License 10000
Cash 10000
31-Dec Amortisation expense-License 1250
Accumulated amortisation-License 1250
(10000-5000)/2 yrs. 12 mths.*6 mths.
20X2
31-Dec Amortisation expense-License 2500
Accumulated amortisation-License 2500
(10000-5000)/2 yrs.
NOTE: (Calendar Year accounting assumed)
20X5
1-Jan Cash 10000
Accumulated amortisation-copyright 12000
Copyright 20000
Gain on sale of copyright(Bal.fig.) 2000
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