Kleen Company acquired patent rights on January 10 of Year 1 for $2,800,000. The patent has a useful life equal to its legal life

Kleen Company acquired patent rights on January 10 of Year 1 for $2,800,000. The patent has a useful life equal to its legal life of eight years. On January 7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $38,000.

a. Determine the patent amortization expense for Year 4 ended December 31.

b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. 

Answer:

a. ($2,800,000 ÷ 8) + ($38,000 ÷ 5) = $357,600 total patent amortization expense

b.  Dec. 31 Amortization Expense—Patents 357,600

Patents357,600

Amortized patent rights

($350,000 + $7,600).