Question

On January 5, Barnaby, Inc., purchased a patent costing $100,000 with a useful life of 20 years. The company records its adjusting entries at the end of each year on December 31.Complete the necessary adjusting entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.Date General Journal Debit CreditJan. 5

Answer 1

Answer:

The necessary journal entries which is to be recorded are shown below:

Explanation:

January 5     Patent A/c.....................Dr    $100,000

                            Cash A/c.......................Cr   $100,000

As patent is purchased so any increase in asset is debited. Therefore, patent account is debited. And cash is going out of the business and any decrease in asset is credited. Therefore, the cash account is credited.

December 31   Amortization expense- Patent A/c..............Dr    $5,000

                               Accumulated amortization- Patent A/c.....Cr   $5,000

As patent is amortized and the amortization expense is bein recorded.

Working Note;

Amortization expense = Patent Cost / Useful life

= $100,000 / 20

= $5,000