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The following are selected 2020 transactions of Pedigo Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $75,000 a patent with an estimated useful life of 5 years and a legal life of 20 years. Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

Respuesta :

AmmarAwais

Answer:

                              Pedigo Corporation

                                  Journal Entries

                                                                        Debit             Credit

Amortization Expense - Patent                    $10,000        

       Patents (Working 1)                                                       $10,000

To record amortization of Patents on December 31, 2020

Explanation:

Working 1:

Amortization expense = Patent cost x 1/5 year x 8/12 months

                                     = $75,000 x 1/5 x 8/12

                                     = $10,000

Note that no entry is made to to amortize Goodwill worth $150,000. This is because Goodwill has an indefinite life. As only entries to record amortization are required, there is no other entry on December 31, 2020.

abiolataiwo2015

The necessary adjusting entries at December 31 to record amortization required by the given event is:

Debit  Amortization expense 10000

Credit  Patents $10,000

Based on the information given the appropriate adjusting journal entry to record the amortization is:

Pedigo Corporation journal entry

Debit  Amortization expense 10000

Credit  Patents $10,000

(To record amortization expense)

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