Kleen company acquired patent rights on january 10 of year 1 for $857,700. the patent has a useful life equal to its legal life of eight years. on january 7 of year 4, kleen successfully defended the patent in a lawsuit at a cost of $36,000. required: a. determine the patent amortization expense for year 4 ended december 31. b. journalize the adjusting entry on december 31 of year 4 to recognize the amortization. refer to the chart of accounts for exact wording of account titles.

a. Amortization expense for Year 4=$572,062.5/5=$114,412.50                                      

b. Adjusting entry to be recorded in respect of amortization as at  December 31, Year 4:

                                              Debit                  Credit

Amortization expense          $114,412.50

Accumulated amortization                              $114,412.50

Explanation:

Cost of patent right at Year 1=                               $857,700

Less:Accumulated amortization for three years=($321,637.5)

($857,700/8)*3

Net book value of patent rights on January 7, year 4=$536,062.5

Add: Cost to defend lawsuit related to patent right = $36,000

Total cost at start of Year 4=$572,062.5

a. Amortization expense for Year 4=$572,062.5/5=$114,412.50                                      

b. Adjusting entry to be recorded in respect of amortization as at  December 31, Year 4:

                                              Debit                  Credit

Amortization expense          $114,412.50

Accumulated amortization                              $114,412.50

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