Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items:

Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items:

Patent with 4 remaining years of legal life	$38,900
Goodwill	40,000

Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model:

Assets

=

Liab.

+

Equity

Rev.

–

Exp.

=

Net Inc.

Cash Flow

Cash

+

Patent

+

Goodwill

90,600

+

NA

+

NA

=

NA

+

90,600

NA

–

NA

=

NA

NA

Required:

a.	Compute the annual amortization expense for these items.

b. Record the acquisition of the intangible assets and the related amortization expense for year 1 in a horizontal statements model like the one shown above.

 

Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.

 

Explanation:

a.

Patent $38,900 ÷ 4 = $9,725 per year

The goodwill is not amortized under GAAP.
Thanks