Question - Journal Entry and Amortization
Jazz Company purchased for $177,000 a patent for a new sound system. Although it gives legal protection for 20 years, the patent is expected to provide the company with a competitive advantage for only six years.
After using the patent for two years, Poolz Music Company's research director learns at a professional meeting that Warner is designing a more powerful system. On the basis of this new information, Poolz Music Company determines that the patent's total useful life is only four years. Record amortization for year 3.
Make journal entries to record:
(a) The purchase of the patent
(b) Record the amortization for year 1.
(c) Record amortization for year 3.