Question

Sunland Company purchases a patent for $169,300 on January 2, 2017. Its estimated useful life is 5 years. (a) Compute amortization expense for the first year. Amortization Expense (b) Show how this patent is reported on the balance sheet at the end of the first year. : $

Answer 1

The amortization expense of the Sunland Company's patent for the first year is $33,860 by dividing the patent's cost of $169,300 by its 5-year useful life. The patent is reported on the balance sheet at the end of the first year at a carrying amount of $135,440 after subtracting the amortization expense.

Step-by-step explanation:

To compute the amortization expense for the first year, we divide the cost of the patent by its estimated useful life. The cost of Sunland Company's patent is $169,300, and the estimated useful life is 5 years.

Amortization Calculation:

Amortization Expense = Cost of Patent / Useful Life of Patent

Amortization Expense = $169,300 / 5

Amortization Expense = $33,860 for the first year

Balance Sheet Reporting:

At the end of the first year, the patent would be reported on the balance sheet in the intangible assets section at cost minus accumulated amortization. Thus, the carrying amount of the patent at the end of the first year would be:

Patent Value at Beginning of Year - Amortization Expense

=$169,300 - $33,860

= $135,440

Answer 2

The presentation and journal entry is shown below:

Step-by-step explanation:

1. Amortization expense $33,860

To Patent $33,860

(Being the amortization expense is recorded)

It is calculated below:

= $169,300 ÷ 5 years

= $33,860

2. The presentation is shown below:

Sunland company

Balance sheet (Partial)

Intangible assets:

Patent is ($169,300 - $33,860) $135,440