Question

lossom Co. bought a patent from Baden Corp. on January 1, 2018, for $930000. An independent consultant retained by Blossom estimated that the remaining useful life at January 1, 2018 is 15 years. Its unamortized cost on Baden’s accounting records was $500000; the patent had been amortized for 5 years by Baden. How much should be amortized for the year ended December 31, 2018 by Blossom Co.?

Answer 1

In the given question we are required to Compute the Amortisation cost of the patent for the year ended 31 December,2018.

To appropriately record the amortization of the patent , we need to know the useful life , Cost of patent & the resale value(if any) of the Patent.

The remaining usefullife of the asset is 15 years.

Cost of patent = $930000

resale value= nil

Hence ,

Amortisation cost of patent for each useful year: COST OF PATENT / USEFUL LIFE

= $930000/15

=$ 62000

the Amortisation cost of the patent for the year ended 31 December,2018 =$ 62000

JournalEntry

amortization expense account (Dr) $62000

To Patent account (Cr) $62000

(Being patent amortisedfor the year)