A Company Purchased a Patent on January 1, 2014, for $2,500,000

question 164

Essay

A company purchased a patent on January 1, 2014, for $2,500,000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30, 2014, the company paid legal costs of $162,000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortize the patent at year end on December 31, 2014.
(b) Milner Company purchased a franchise from the Tasty Food Company for $450,000 on January 1, 2014. The franchise is for an indefinite time period and gives Milner Company the exclusive rights to sell Tasty Wings in a particular territory. Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting entry at year end on December 31, 2014.
(c) Huerter Company incurred research and development costs of $500,000 in 2014 in developing a new product. Prepare the necessary journal entries during 2014 to record these events and any adjustments at year end on December 31, 2014.

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Definitions:

Rorschach

A psychological test in which subjects' perceptions of inkblots are recorded and then analyzed using psychological interpretation, complex algorithms, or both.

Minnesota Multiphasic Personality Inventory

A comprehensive psychological assessment tool consisting of a series of statements that individuals respond to, used to identify personality structure and psychopathology.

Vague, Ambiguous Scenes

Scenarios or images lacking clear, definite boundaries or meanings, often used in psychological assessments to explore an individual's perceptions, thoughts, and feelings.

Rorschach Test

A projective psychological test consisting of ten inkblots printed on cards (five in black and white, five in color) used to assess an individual's personality structure and identify emotional disorders.