Question

Cheyenne Corporation purchases a patent from Oriole Company on January 1, 2020, for $64,000. The patent has a remaining legal life of 16 years. Cheyenne feels the patent will be useful for 10 years. Assume that at January 1, 2022, the carrying amount of the patent on Cheyenne’s books is $51,200. In January, Cheyenne spends $37,600 successfully defending a patent suit. Cheyenne still feels the patent will be useful until the end of 2029.

Answer 1

	Cheyenne Corporation
	General,Journal	Debit	Credit
	Patent	$ 64,000.00
	To Cash		$ 64,000.00
	(Being amount of Patent purchased)
*	Amortization Expense($64000/10)	$   6,400.00
	To Patent		$   6,400.00
	(Being amount of amortization of patent)
	Patent	$ 37,600.00
	To Cash		$ 37,600.00
	(Amount paid for successfully defending the Patent)
**	Amortization Expense($51200+$37600)/8	$ 11,100.00
	To Patent		$ 11,100.00
	(Being amortization expense of Patent)
*	Useful life 10 years on 1 Jan,2020
**	Useful life 8 years on 1 Jan,2022