On July 1 2018 Graunke Company Purchased a Patent from Chimney

question 170

Multiple Choice

On July 1 2018 Graunke Company purchased a patent from Chimney Rock Company for $8000000.It was estimated that the patent has a remaining useful life of 4 years.On July 1 2022 Graunke retired the asset.Use the following tabular analysis to make the adjustment for retirement assuming that the cost has been fully amortized.

• A)Increase Expenses and decrease Patents $2000000.
• B)Decrease Patents and increase Expenses $1000000
• C)Increase Revenues and decrease Patents $8000000.
• D)The Patent account would have a zero balance so no entry would be needed.

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Definitions:

Payroll Accrual

An accounting method that records payroll expenses incurred but not yet paid out to employees, ensuring expenses are recognized in the period they are incurred.

Accounting Period

The span of time covered by financial statements, often a quarter or year, reflecting the company's financial performance and position.

Accrual Entry

An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Accounting Accruals

Accounting method where revenue and expenses are recorded when they are earned or incurred, not necessarily when cash is received or paid.