Yolanda Company created a product for which it was able to obtain a patent. Yolanda sold this patent to Christiana Inc. for $4 million at the beginning of Year One. Christiana paid an additional $200,000 in legal fees to properly record the patent. On that date, Christiana determined that the patent had a remaining legal life of ten years but a useful life of only seven years. The straight-line method is to be applied with no expected residual value.

• a.)Record Christianas purchase of the patent.Record amortization of the patent at the end of Year One and Year Two.

• b.) What is the book value of the patent reported on Christianas balance sheet at the end of Year Three?

• c.) During Year Four, Christiana is sued by Bushnell Corporation. Bushnell claims that it has a patent on a product very similar to the one held by Christiana and that Bushnells patent was registered first. Christiana spends $600,000 during Year Four and successfully defends the patent. What entry is made for these expenditures?

• d.) Use the same facts as in 2.d. except assume that Christiana is not able to successfully defend its right to this patent. What journal entry is made?