When Scranton Tools Bought Tipton Hardware, Included in the Purchase

question 127

Multiple Choice

When Scranton Tools bought Tipton Hardware, included in the purchase price was a patent valued at $26,000. The patent still has 10 years remaining of its legal life. However, it is estimated that the useful life of the patent is only 8 years. The journal entry to record the annual patent amortization expense would include a

• A) Debit to Amortization Expense, patent for $2,600
• B) Credit to Patent for $2,600
• C) Debit to Amortization Expense, patent for $3,250
• D) Debit to Patent for $3,250

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Definitions:

M1

Refers to the physical money supply that includes coins and notes in circulation as well as non-bank public holdings of checkable deposits.

M2

Includes all elements of M1 along with near money, such as savings deposits, time deposits under $100,000, and non-institutional money market funds.

M1

This term identifies the core components of the money supply, focusing primarily on currency and liquid assets held by the public.

Trade Deficit

Occurs when a country's imports exceed its exports during a given time period, indicating that it is buying more foreign products than it is selling domestically.