For Each of the Following Unrelated Transactions (A) Determine the Amount

question 264

Essay

For each of the following unrelated transactions (a) determine the amount of the amortization expense or depletion for the current year and (b) present the adjusting entries required to record each expense at year end.
(1) Timber rights were purchased on a tract of land for $480000. The timber is estimated at 1200000 board feet. During the current year 75000 board feet of timber were cut and sold.
(2) Costs of $8000 were incurred on January 1 to obtain a patent. Shortly thereafter $22000 was spent in legal costs to successfully defend the patent against competitors. The patent has an estimated legal life of 12 years.

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Definitions:

Reciprocal Treatment

A principle where two parties provide the same advantages or conditions to each other.

Civil Code

A body of written law that sets out the private rights of the citizens of a state.

Adequacy of Consideration

The fairness of the value exchanged in a contract, ensuring that what is received is reasonable compared to what is given.

Neo-Expressionist

Referring to a modern art movement characterized by intense subjectivity and rough handling of materials.