E7-26A. (Learning Objectives 3, 5: Recording intangibles, amortization, and a change in the asset’s useful life)

1. Master Printers purchased for $920,000 a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Master Printers with a competitive advantage for only 10 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 five years, Master Printers learns at an industry trade show that Super Printers is designing a more efficient printer. On the basis of this new information, Master Printers determines that the patent’s total useful life is only seven years. Record amortization for year 6.