Franc Company
On January 4, 2016, Franc Company purchased for
$24,000 a patent that had been filed 8 years earlier. The patent covers a manufacturing process that the company plans to use for 15 years. On January 3, 2017, the company paid its lawyers $11,000 for successfully defending the patent in a lawsuit.
I am have most of the answers, however, not sure about the account to which to expense the legal fees. Also, the amortization expense amount to be charged in 2017. I assumed it would $24,000/12 years = $2000 which was the correct amount for 2016.
List of accounts:
ASSETS
111 Cash
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
189 Accumulated Depreciation
191 Patent
LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
REVENUE
411 Sales Revenue
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
533 Amortization Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense
I have tried Misc expense and Amortization expense but it was incorrect.
For the 2017 Amortization amount, I tried $2000, but it was incorrect.
DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
Jan. 4, 2016 Patent 24,000.00
Cash 24,000.00
Dec. 31, 2016 Amortization Expense 2,000.00
Patent 2,000.00
Jan. 3, 2017 ????? 11,000.00
Cash 11,000.00
Dec. 31, 2017 Amortization Expense ?????
Patent ???????
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