When S. Dee Company bought B. Darin Company, the purchase price included a patent valued at $15,000. The patent has 10 years remaining of its legal life, but its estimated useful life to S. Dee Company was only 8 years. The journal entry to record the annual patent amortization would include a
A) debit to Patent, $1,875
B) debit to Amortization expense, $1,875
C) credit to Patent, $1,500
D) credit to Amortization expense, $1,500

Question

Quizplus · Accepted Answer

Patents are intangible assets with a limited legal life, and their costs are amortized over this period. The journal entry to record the annual patent amortization would include a debit to Amortization Expense and a credit to Patent. The debit and credit amounts would be equal to the cost of the patent divided by its estimated useful life, which in this case is $15,000 divided by 8 years, or $1,875. Therefore, the correct choice is B.

When S Dee Company Bought B