Question

Indigo Pastels purchased a patent on July 1 for $167,000. If the patent is assumed to...

Indigo Pastels purchased a patent on July 1 for $167,000. If the patent is assumed to have a 14-year useful life and no residual value, what account and amount should be debited in the December 31 adjusting entry?

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Answer #1

Amortization expense should be debited with $5,964.24 or 5,964 rounded off

Working

Straight line Method
A Cost $ 167,000
B Residual Value $ 0
C=A - B Amortization base $ 167,000
D Life [in years left ]                                14
E=C/D Annual SLM Amortization $ 11,928.57

.

Year Book Value Depreciation expense
1 $        167,000.00 $               5,964.29*

*Amortization for 6 months = 11928.57/2

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