Question

Accounting for Intangible Assets and Natural Resources

On June 1, ABC Inc. purchased a patent for $75,000 with a useful life of 10 years. Prepare the journal entry to amortize the patent at the end of the first year assuming ABC Inc. follows a calendar year.

On January 4, ABC Inc. purchased a music distributor's collection of lyrics and songs for $425,000. The copyrights are expected to last another 10 years. Prepare the journal entry to amortize the copyright at the end of the first year.

ABC, Inc.
Journal Entries
Date		Account Name
			Debit	Credit
1-Jun	a)
4-Jan	b)

Answer 1

Solution:

ABC Inc.
Journal Entries
Date	Particulars	Debit	Credit
31-Dec	Amortization expense Dr ($75,000/10*6/12)	$3,750.00
	To Accumulated amortization - Patent		$3,750.00
	(To record amortization of patent)
31-Dec	Amortization expense Dr ($425,000/10)	$42,500.00
	To Accumulated amortization - Copyright		$42,500.00
	(To record amortization of Copyright)