1. Mayflower Printers incurred costs of $1,200,000 for a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Mayflower Printers with a competitive advantage for only 12 years. Assuming the straight-line method of amortization, make journal entries to record
(a) The purchase of the patent and
(b) Amortization for year 1.
2. After using the patent for 8 years, Mayflower Printers learns at an industry trade show that Superb Printers is designing a more-efficient printer. On the basis of this new information, Mayflower Printers determines that the expected future cash flows from the patent are only $350,000 and that the patent is worthless on the open market. Is this asset impaired? If so, record the impairment adjusting entry.