Brown Company paid $900,000 cash to purchase the following tangible and intangible assets of Coffee Company on January 1, 2016:
Land $300,000
Building 200,000
Patents 100,000
Machinery 250,000
The building is depreciated using the double-declining balance method, has an estimated useful life of ten years, and a residual value of $10,000. The machinery has an estimated useful life of five years and a residual value of 10% of cost. Depreciation expense is calculated on the basis of productive output. The machinery's productive output was estimated to be 60,000 units. Actual production was as follows:
2016 10,000
2017 15,000
2018 20,000
The patents have an estimated useful life of twenty years and are amortized on a straight-line basis. They have no residual value. On December 31, 2017, the value of the patents was estimated to be $80,000. The machinery was sold on December 2, 2018 for $100,000. The company uses the ½ year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31.
Required: Prepare journal entries to record in the records of Brown:
1. The $900,000 purchase
2. Depreciation and amortization expense for 2016
3. The decline in value of the patents at December 31, 2017
4. The sale of the machinery.