Question 12:

A business purchases a patent for $80,000 with a useful life of 8 years.

Requirements:

1. Calculate the annual amortization expense using the straight-line method.

2. Record the journal entry to recognize the purchase of the patent.

3. Post the journal entry to the Patent account in the ledger.

4. Analyze how this transaction affects the company's balance sheet.

5. Discuss the importance of amortizing intangible assets and its impact on financial statements.