Jan. 1Purchased a small company and recorded goodwill of $177,000. Its useful life is indefinite. May 1Purchased 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.

The Journal entries are as follows:

(i) On December 31,

No entry

(ii) On December 31,

Amortization expense A/c Dr. $16,000

To Patents A/c $16,000

(To record the amortization expenses)

Workings:

Amortization expense:

= (Purchasing cost of patent : Estimated useful life) * Time period

= ($144,000 : 6) * (8/12)

= $24,000 * (8/12)

= $16,000