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14 April, 07:10

The entry to record patent amortization expense: A. increases total assets and decreases total stockholders' equity. B. increases both total assets and total stockholders' equity. C. decreases total assets and increases total stockholders' equity. D. decreases both total assets and total stockholders' equity.

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Answers (2)
  1. 14 April, 09:25
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    D. the entry to record patent amortization expense decreases both total assets and total stockholders' equity

    Explanation:

    Patents give companies the exclusive right to produce a particular product or service for a period of time, after which other competitors can produce it in the market place. Like any other tangible asset gets depreciated over its life span, an intangible asset such as a patent has to be amortized until it expires.

    When the patent is obtained, it is recorded as an asset. After that, an amortization expense is recorded every year until the patent asset account becomes zero. To do this patent amortization expense, the record is:

    Debit - Patent Amortization expense account

    Credit - Patent Accumulated amortization expense account

    The debit decreases the stockholders' equity and the credit decreases the asset.

    Hence, the entry to record patent amortization expense decreases both total assets and total stockholders' equity.
  2. 14 April, 10:26
    0
    D. decreases both total assets and total stockholders' equity.

    Explanation:

    At first, we have to give the journal

    Amortization expense Debit

    Accumulated amortization expense Credit

    As amortization expense decreases net income, it will decrease the shareholder equity. As Accumulated depreciation is a contra entry, it reduces patent.

    Therefore, option D is the answer.

    In other options, we can not determine the above requirements.
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