Question

The following are selected 2019 transactions of Bramble Corporation. Jan. 1 Purchased a small company and recorded goodwill of $177,000. Its useful life is inderinite. May 1 Purchased for $144,000 a patent with an estimated useful life of 6 years and a legal life of 19 years. Prepare necessary adjusting entries at December 31 to record amortization required by the events above. (Dt no entry is reguired Select "No entry-for the account titles and enter 0 for the amounts·?dit account titles are automaticary indented when amount is entered. Do not Indent manually) Date Account Tties and Explanatlion Debit Credit Dec. 31 To record goodwill amortisation) Dec. 31 To record patent amortisation)

Answer 1

Purchased Goodwill

No Entry. Consider Impairment

Patent

Amortization - Patent (SPL)$ 16,000 (debit)

Accumulated Amortization (SFP) $ 16,000 (credit)

Step-by-step explanation:

Purchased Goodwill

The Goodwill with indefinite useful life should be continuously assessed of any indications of impairment. There is no amortization charge on this intangible asset

Patent

The Patent is amortized over its useful life as follows

Amortization = Cost / Useful Life

= $144,000 / 6 years × ( 8/12)

= $ 16,000

Journal Entry

Amortization - Patent $ 16,000 (debit)

Accumulated Amortization $ 16,000 (credit)