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23 July, 00:08

The following are selected 2020 transactions of Pedigo Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $75,000 a patent with an estimated useful life of 5 years and a legal life of 20 years. Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

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  1. 23 July, 00:16
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    Pedigo Corporation

    Journal Entries

    Debit Credit

    Amortization Expense - Patent $10,000

    Patents (Working 1) $10,000

    To record amortization of Patents on December 31, 2020

    Explanation:

    Working 1:

    Amortization expense = Patent cost x 1/5 year x 8/12 months

    = $75,000 x 1/5 x 8/12

    = $10,000

    Note that no entry is made to to amortize Goodwill worth $150,000. This is because Goodwill has an indefinite life. As only entries to record amortization are required, there is no other entry on December 31, 2020.
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