Question
On June 1, 20X1, Epsilon Corporation acquired a patent for $100,000 cash. The patent has a useful life of 10 years. Using the straight-line method,
On June 1, 20X1, Epsilon Corporation acquired a patent for $100,000 cash. The patent has a useful life of 10 years. Using the straight-line method, calculate the amortization expense for the year 20X1.
Additionally, Epsilon Corporation made the following transactions during 20X1:
- August 15: Epsilon Corporation paid $10,000 for legal fees related to the acquisition of the patent.
- October 1: Epsilon Corporation incurred $5,000 in research and development expenses to enhance the patent's technology.
Furthermore, Epsilon Corporation provided the following information regarding its financial statements for the year 20X1:
| Date | Description | Amount |
|---|---|---|
| June 1 | Patent acquisition | $100,000 |
| August 15 | Legal fees | $10,000 |
| October 1 | Research and development | $5,000 |
Required:
- Calculate the total amortization expense for the year 20X1 for the patent.
- Prepare the journal entries to record the patent-related transactions for Epsilon Corporation during the year 20X1.
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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
7th Canadian edition
1119368456, 978-1119211587, 1119211581, 978-1119320623, 978-1119368458
