On September 30, 2016, Leeds LTD. acquired a patent in conjunction with the purchase of another company.

Question:

On September 30, 2016, Leeds LTD. acquired a patent in conjunction with the purchase of another company. The patent, valued at $6 million, was estimated to have a 10-year life and no residual value. Leeds uses the straight-line method of amortization for intangible assets. At the beginning of January 2018, Leeds successfully defended its patent against infringement. Litigation costs totaled $500,000.

Required:

1. Calculate amortization of the patent for 2016 and 2017.

2. Prepare the journal entry to record the 2018 litigation costs.

3. Calculate amortization for 2018.

4. Repeat requirements 2 and 3 assuming that Leeds prepares its financial statements according to IFRS.

Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...