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Chapter 12: Question 2. (page 638)

Use the information provided in BE12-1. Assume that at January 1, 2019, the carrying amount of the patent on Taylor Swift’s books is \(43,200. In January, Taylor Swift spends \)24,000 successfully defending a patent suit. Taylor Swift still feels the patent will be useful until the end of 2026. Prepare the journal entries to record the $24,000 expenditure and 2019 amortization.

Short Answer

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Answer

Two journal entries are made to record the expenditure and amortization. The expenditure amounts to $24,000 and the amortization expense amounts to $8,400 for the year 2019.

Step by step solution

01

Journal Entry

S. no.

Particulars

JF

Debit

Credit

1.

Patents

24,000

Cash

24,000

(Being patents purchased by cash)

2.

Amortization Expense

8,400

Patents

8,400

(Being amortization made on patents)

02

Calculation of amortization

Amortization=(CarryingcAmountofPatent+DefendingCost)×18=($43,200+$24000)×18=$8400

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