On July 1, 2017, Cavaliers Corp. purchased a patent from a third-party, Nets Inc. for $60,000. On July 1, 2020, Cavaliers paid $12,000 for successful litigation in defending the patent. Cavaliers estimates that the useful life of the patent will be 15 years from the date of acquisition and choose to credit the patent account immediately for the quantity of the amortization.

Instructions

1. Prepare a calculation of the carrying value of the patent on December 31, 2020. Label and show all calculations. (9 marks)
2. Prepare the journal entry to record the sale, assuming Cavaliers sold the patent on January 1, 2021, for a net proceed of $100,000. (3 marks)

Please answer all parts.