the straight-line method of amortization
Miracle Printers (MP) manufactures printers. Assume that MP recently paid $700.000 for a patent on a new laser printer. Although it
gives legal protection for 20 years. the patent is expected to provide a competitive advantage for only ten years.
1. Assuming the straight-line method of amortization. make journal entries to record (a) the purchase ofthe patent and (b)
amortization for year 1.
2. After using the patent for five years. MP learns at an industry trade show that another company is designing a more efficient
printer. On the basis ofthis new information. MP decides. starting with year 6. to amortize the remaining cost ofthe patent over
two remaining years. giving the patent a total useful life of 7 years. Record amortization for year 6.
(a) Record the purchase ofthe patent.
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