Trask Company purchased a patent for USD 108,000 on 2009 January 2. The patent was estimated to have a finite life of 10 years. The USD 108,000 cost was properly charged to an asset account and amortized in 2009. On 2010 January 1, the company incurred legal and court costs of USD 32,400 in a successful defense of the patent in a lawsuit. The legal work was performed by an outside law firm.
a. Compute the patent amortization expense for 2009 and give the entry to record it.
b. Compute the patent amortization expense for 2010 and give the entry to record it.
Alternate problem G Selected transactions and other data for Grant Company:
a. The company purchased a patent in early January 2006 for USD 144,000 and began amortizing it over its finite life of 10 years. In early January 2008, the company hired an outside law firm and successfully defended the patent in an infringement suit at a cost of USD 38,400.
b. Research and development costs incurred in 2008 of USD 43,200 were expected to provide benefits over the three succeeding years.
c. On 2009 January 2, the company rented space in a warehouse for five years at an annual fee of USD 9,600. Rent for the first and last years was paid in advance.
d. A total of USD 96,000 was spent uniformly throughout 2009 by the company in promoting its lesser known trademark, which is expected to have a finite useful life of 20 years.
e. In January 2007, the company purchased all of the assets and assumed all of the liabilities of another company, paying USD 192,000 more than the fair market value of all identifiable assets acquired, less the liabilities assumed. The company expects the cash flow benefits for which it paid the USD 192,000 to last 10 years (finite useful life). For each of these unrelated transactions, prepare journal entries to record only those entries (required for 2009. Note any items that do not require an entry in 2009.