Question 5: A company purchases a patent for $100,000 with a useful life of 10 years. Outline the journal entries and subsequent amortization schedule to record the patent acquisition and amortization expense using the straight-line method.

Requirements:

1. Record the journal entry to recognize the purchase of the patent.
2. Post the journal entry to the Patents account in the ledger.
3. Calculate the annual amortization expense using the straight-line method.
4. Record the journal entry to recognize the annual amortization expense.
5. Post the journal entry to the Amortization Expense account in the ledger.
6. Prepare an amortization schedule showing the annual amortization expense and accumulated amortization for each year over the patent's useful life.
7. Analyze how these transactions affect the company's balance sheet and income statement.
8. Discuss the importance of amortizing intangible assets and its impact on financial statements.
9. Evaluate the potential impairment of the patent and its effect on the amortization schedule.
10. Illustrate how the straight-line method evenly allocates the patent's cost over its useful life for financial reporting purposes.