Question

On January 5, 2015, Barnaby, Inc., purchased a patent costing $100,000 with a useful life of 20 years. The company records its adjusting entries at the end of each year on December 31. Complete the necessary adjusting entry by selecting the account names and dollar amounts from the drop-down menus.

Answer 1

Dr Patent $100,000

Cr Cash $100,000

Being purchase of a new patent

Dr Amortization expense $5,000

Cr Accumulated amortization $5,000

Step-by-step explanation:

The purchase of patent at $100,000 requires that the cash account is credited to reflect the cash outflow and the patent-intangible asset account is debited.

However,at end of the year, the amortization on the patent of $5,000($100,000/20) must be adjusted for by debiting amortization expense account and crediting accumulated amortization