Question

On April 1, a patent with an estimated useful economic life of 12 years was acquired for $43,200. In addition, on December 31, it was estimated that goodwill of $35,000 was impaired.

Question Content Area
a. Journalize the entry to record the acquisition of the patent. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit
April 1

Question Content Area
b. Journalize the adjusting entry on December 31 for the amortization of the patent rights. Do not round intermediate calculations. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit
December 31

Question Content Area
c. Journalize the adjusting entry on December 31 for the impaired goodwill. If an amount box does not require an entry, leave it blank.

DateAccountDebitCredit
December 31

Answer 1

Let's break this down step by step for each part of the journal entries required.

### a. Journalize the entry to record the acquisition of the patent.

**Date**: April 1
**Account**: Patent
**Debit**: $43,200
**Account**: Cash (or Accounts Payable, depending on how the patent was financed)
**Credit**: $43,200

The journal entry will be:

| Date | Account | Debit | Credit |
|------------|----------------|---------|---------|
| April 1 | Patent | 43,200 | |
| | Cash | | 43,200 |

### b. Journalize the adjusting entry on December 31 for the amortization of the patent rights.

To calculate the annual amortization expense for the patent, you would divide the cost of the patent by its useful economic life. Here's the calculation:

Amortization Expense = Cost of Patent / Useful Life
Amortization Expense = $43,200 / 12 years = $3,600 per year

**Date**: December 31
**Account**: Amortization Expense
**Debit**: $3,600
**Account**: Accumulated Amortization - Patent
**Credit**: $3,600

The journal entry will be:

| Date | Account | Debit | Credit |
|------------|-------------------------------|---------|---------|
| December 31 | Amortization Expense | 3,600 | |
| | Accumulated Amortization - Patent | | 3,600 |

### c. Journalize the adjusting entry on December 31 for the impaired goodwill.

For goodwill impairment, you would typically record it directly against the Goodwill account.

**Date**: December 31
**Account**: Impairment Loss - Goodwill
**Debit**: $35,000
**Account**: Goodwill
**Credit**: $35,000

The journal entry will be:

| Date | Account | Debit | Credit |
|------------|-------------------------------|---------|---------|
| December 31 | Impairment Loss - Goodwill | 35,000 | |
| | Goodwill | | 35,000 |

These entries reflect the acquisition of the patent, the amortization expense for the year, and the amortization of the impaired goodwill.