Intangible Assets
Response to the following problem:
On January 1, 2008, Landon Company purchased a patent for $250,000 to allow it to improve its product line. On July 1, 2008, Landon Company purchased another existing business in a nearby city for a total cost of $750,000. The market value of the land, building, equipment, and other tangible assets was $550,000. The excess $200,000 was recorded as goodwill.
Assuming Landon Company amortizes patents over a 20-year period, record the following
1. The purchase of the patent on January 1, 2008.
2. The amortization of the patent at December 31, 2008.
3. Under what conditions would goodwill be amortized on the books of Landon?