1. Midway Printers incurred external costs of $600,000 for a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Midway Printers with a competitive advantage for only ten years. Assuming the straight-line method of amortization, make journal entries to record
(a) The purchase of the patent and
(b) Amortization for year I.
2. After using the patent for five years, Midway Printers learns at an industry trade show that Superb Printers is designing a more efficient printer. On the basis of this new information, Midway Printers determines that the expected future cash flows from the patent are only $230,000 and that the patent is worthless on the open market. Is this asset impaired? If so, record the impairment adjusting entry?