Miracle Printers (MP) manufactures printers
Suppose that MP recently paid $600,000 for a patent on a new laser printer. Though it gives legal protection for 20 years, the patent is expected to give a competitive benefit for only eight years.
1) Supposing the straight-line method of amortization, make journal entries to record (a) the purchase of the patent and (b) amortization for year 1.
2) After using the patent for 4-years, MP learns at an industry trade show that the other company is designing a more proficient printer. On the basis of this new information, MP decides, starting with year 5, to amortize the remaining cost of the patent over two remaining years, providing the patent a total useful life of six years. Record the amortization for year 5.