Answer :
Answer:
Taylor Swift Corporation
a Journal Entries:
Jan. 1, 2020:
Debit Patent $54,000
Credit Cash $54,000
To record the purchase of patent purchased from Salmon Company.
December 31, 2020:
Debit Amortization Expense $5,400
Credit Accumulated Amortization - Patent $5,400
To record the amortization expense for the year.
b) Journal Entries:
January 1, 2019:
Debit Patent $24,000
Credit Cash $24,000
To record cash for defending the patent.
December 31, 2019:
Debit Amortization Expense $8,400
Credit Accumulated Amortization - Patent $8,400
To record the amortization expense for the year.
Explanation:
a) Data and Calculations:
January 1, 2020 Purchased Patent from Salmon Company = $54,000
Estimated useful life = 10 years
Annual amortization expense - $5,400 ($54,000/10)
b) Carrying amount of Patent on January 1, 2019 = $43,200
Amount spent to successfully defend the patent 24,000
Total value of patent = $67,200
Estimated useful life = 8 years (January 1, 2019 to December 31, 2026)
Annual amortization expense = $8,400 ($67,200/8)
b) The $24,000 spent for the successful defense of the patent will be capitalized. This means that the carrying balance of the Patent changes from $43,200 to $67,200. Amortization is calculated based on $67,200 on a straight-line basis for 8 years.
Journal Entry is the 1st step of the accounting cycle that records only the monetary business transactions. It uses a double-entry bookkeeping system as it provides the dual effect of each transaction in the books of accounts. These entries are used further to prepare books of accounts.
Find the attachment for the given Journal Entry.
(a) Data and calculations:
January 1, 2020 - Purchases done by Salmon Company = [tex]\[/tex] 54, 000.
Useful Life Estimated = 10 years
Amortization Expese Annually = [tex]\dfrac{54, 000}{10}[/tex] = [tex]\[/tex] 5,400.
(b) Carrying Amount Patent on Jan 1, 2019 = [tex]\[/tex] 43, 200.
Amount Spent Successfully to defend the patent = [tex]\[/tex] 24, 000.
Total Value = [tex]\[/tex] 67, 200.
Estimated Useful Life = 8 years
Amortization Expense Annually = [tex]\dfrac{67, 200}{8}[/tex] = [tex]\[/tex] 8, 400.
Hence, the [tex]\[/tex] 24, 000 will be spent for the successful defense of the patent will be capitalized. This means that the carrying balance of the Patent Changes from dollar 43, 200 to 67, 200. The amortization for straight 8-years is calculated at $67,200.
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