E-Shop Company acquired patent rights on January 10, 2009, for $900,000. The patent has a useful life equal to its legal life of 12 years. On January 7, 2012, E-Shop successfully defended the patent in a lawsuit at a cost of $112,500.
a. Determine the patent amortization expense for the current year ended December 31, 2012.
b. Illustrate the effects on the accounts and financial statements to recognize the amortization.