(A) a Company Purchased a Patent on 1 January, 2019

Short Answer

(a) A company purchased a patent on 1 January, 2019, 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 30 June, 2019, the company paid legal costs of $162,000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortise the patent at year end on 31 December, 2019.
(b) The Walker Company purchased a franchise from the Tasty Food Company for $400,000 on 1 January, 2019. The franchise is for an indefinite time period and gives the Walker 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 31 December, 2019. The franchise is expected to have value for a period of 20 years.
(c) Dawson Company incurred research and development costs of $500,000 in 2019 in developing a new product.
Prepare the necessary journal entries during 2019 to record these events and any adjustments at year end on 31 December, 2019.