In January of Year 1, Ford Co. purchased a patent from a research institution for $625,000. The patent was estimated to have a useful life of 15 years. In December of Year 2, Ford Co. unsuccessfully defended the patent in legal proceedings. The fair value of the patent on December 31 of Year 2, is now estimated to be $125,000 with a 2-year useful life.

a. Record the entry for the legal fees of $50,000, paid in cash. b. Record any adjusting entry required on December 31 of Year 2. c. Determine the carrying value of the patent on December 31 of Year 2.