Conrad Inc. purchased a patent for $1,000,000 for a specialty line of patented switch plate covers and

Question:

Conrad Inc. purchased a patent for $1,000,000 for "a specialty line of patented switch plate covers and outlet plate covers specifically designed to light up automatically when the power fails." Assume the switch plate patent was purchased January 1, 2014, and it is being depreciated over a period of 10 years. Assume that Conrad Inc. does not use an accumulated amortization account but instead charges amortization directly against the intangible asset account.
Required:
1. Describe the effects of the purchase and amortization of the switch plate patent on the 2014 and income statement.
2. Give the journal entries to record the purchase and amortization of the switch plate patent in 2014.
3. After a year of unsuccessful attempts to manufacture the switch plate covers, Conrad Inc. determined the patent was significantly impaired and its book value on January 1, 2014, was written off. Describe the financial statement effects of accounting for the asset impairment and give the journal entry to record the impairment.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...