Accounting for Patents
On January 3, 2000, Merris Company spent $89,000 to apply for and obtain a patent on a newly developed product. The patent had an estimated useful life of 10 years. At the beginning of 2004, the company spent $16,000 in successfully prosecuting an attempted infringement of the patent. At the beginning of 2005, the company purchased for $37,000 a patent that was expected to prolong the life of its original patent by five years. On July 1,
2008, a competitor obtained rights to a patent that made the company’s patent obsolete.
Instructions: Give all the entries that would be made relative to the patent for the period 2000–2008, including entries to record the purchase of the patent, annual patent amortization, and ultimate patent obsolescence. (Assume the company’s accounting period is the calendar year.)