On March 31, 2009, Lincoln Med Co acquired an existing patent to produce a pain reliever from

Question:

On March 31, 2009, Lincoln Med Co acquired an existing patent to produce a pain reliever from Jefferson Pharma ceuticals for $1,871,800. The patent offers exclusive rights to produce this medication for another seven years. Lincoln’s ﬁscal year ends on December 31.
Required:
(a) What journal entry is made on March 31, 2009, to record the purchase of the patent?
(b) What will be the of this patent after seven years? Explain the rationale for your answer.
(c) What amount of amortization should be taken in 2009, 2010, and 2016?
(d) Prepare the December 31, 2009, journal entry related to this patent.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...