Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2009, when it was acquired at a cost of $15.3 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2013 (before adjusting and closing entries). Required:Prepare the appropriate adjusting entry for patent amortization in 2013 to reflect the revised estimate. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 5,500,000 should be entered as 5.5)) Event General Journal Debit Credit1 Amortization Expense

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Business

Larissa Bruce

18 April, 08:35

Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2009, when it was acquired at a cost of $15.3 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2013 (before adjusting and closing entries). Required:Prepare the appropriate adjusting entry for patent amortization in 2013 to reflect the revised estimate. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 5,500,000 should be entered as 5.5)) Event General Journal Debit Credit1 Amortization Expense

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Annora · Answer 1

Accumulated Amortization (debit) $566,667

Amortization expense (credit) $566,667

Explanation:

Amortization of Intangible Asset = Cost / Estimated Useful Life

Amortization Charge for 2009

Amortization of Intangible Asset = Cost / Estimated Useful Life

= $15,300,000/9

= $1,700,000

Amortization Charge 2009 - 2012

Amortization of Intangible Asset = Cost / Estimated Useful Life

= $15,300,000/9

= $1,700,000

Total = $1,700,000 * 4 = $6,800,000

Amortisation Charge in 2013

Amortization of Intangible Asset = Cost / Estimated Useful Life

= $15,300,000/9

= $1,700,000

Revised:

Amortization of Intangible Asset = Cost - Previous Amortization / Remaining Useful Life

= $15,300,000-$6,800,000-$1,700,000/6

= $1,133,333

Adjusting Journal:

Note : Adjust as if Change happened at Beginning of the year

Accumulated Amortization (debit) $566,667

Amortization expense (credit) $566,667

Adjustment = $1,700,000 - $1,133,333 = $566,667