E7-40B. (Learning Objectives 3, 5: Recording intangibles; amortization, and a change in the asset’s useful life)

1. Royal Printers purchased for €780,000 a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Royal Printers with a competitive advantage for only eight 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 four years, Royal Printers learns at an industry trade show that Speedy Printers is designing a more efficient printer. On the basis of this new information, Royal Printers determines that the patent’s total useful life is only six years. Record amortization for year 5.