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.
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