Question

Ivanhoe Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2019, the company expends $327,000 on a research project, but by the end of 2019 it is impossible to determine whether any benefit will be derived from it. The project is completed in 2020, and a successful patent is obtained. The R&D costs to complete the project are $117,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2020 total $17,500. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2020. (Credit account titles are automatically indented when amount is tered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Research and Developmen 117000 117000 Cash (To record research and development costs) Patents 17500 7500 Cash (To record legal and administrative costs) Amortization Expense 3500 3500 Patents (To record one year's amortization expense)

Answer 1

Revised patents cost= 17500+51200=$68700

Less: Amortised expense=$3500

Patent cost to be amortised for rest of the useful life= $65200

Remaining life =8 years

Amortisation exp=$8150

Thus, the journal entry will be

Amortisation exp 8150

To patents. 8150

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