Advanced Design Sales Acquired a Patent on January 1 for $35,000

question 74

Essay

Advanced Design Sales acquired a patent on January 1 for $35,000. The patent is expected to be of benefit to Advanced Design Sales for 5 years. Prepare the journal entry to record the acquisition of the patent and the amortization expense for the first year.

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Definitions:

Variable Expense

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Sales Budget

A sales budget estimates the expected sales revenue for a certain period, projecting quantities sold and revenues earned.

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life.

Merchandise Inventory

Goods that a retailer, wholesaler, or distributor holds for the purpose of resale.