Intangible Assets

On January 1, 2018, Hall Company purchased a patent for $600,000. Hall expects to use the patent for 20 years and amortizes the patent using the straight-line method. Hall incurs $40,000 in legal costs to successfully defend the patent on January 1, 2020. Hall estimates that the remaining useful life of the patent to be 8 years.

Instructions:

1. Prepare all necessary journal entries for 2020 and 2021.
2. How would your answer change if the defense of the patent was unsuccessful?