Question

Van Frank Telecommunications has a patent on a cellular transmission process.
1. The company has amortized the $19.80 million cost of the patent on a straight-line basis, since it was acquired at the beginning of 2012.
2. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost.
3. The decision was made at the end of 2016 (before adjusting and closing entries).
What is the appropriate adjusting entry for patent amortization in 2016 to reflect the revised estimate.
(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) Record the adjusting entry for patent amortization in 2016.

Answer 1

Answer:

Dr Amortization expense 5.50

Cr Accumulated Amortization - Patent 5.50

Explanation:

Preparation of Journal entries to Record the adjusting entry for patent amortization in 2016

Van Frank Telecommunications

Dr Amortization expense 5.50

Cr Accumulated Amortization - Patent 5.50

(To record amortization of patent)

Calculation for the Amortized expense

Cost of the asset $19.80

Annual amortization $2.20

($19.80 / 9 years)

Amortization till date (2012-2015) $8.80

($2.20*4)

Unamortized value ($19.80-$8.80) $11.00

Remaining life 2 years

Amortized expense ($11.00/2) $5.50