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Blossom Company purchases a patent for $158,000 on January 2, 2017. Its estimated useful life is 8 years. (a) Compute amortization expense for the first year. Amortization Expense (b) Show how this patent is reported on the balance sheet at the end of the first year.

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Answer:

a. 19.750 b. 138.250

Explanation:

A. We divide 158.000 by 8 to get the amount per year

158.000/8= 19.750

  • Amortization expense (Db) 19.750
  • Accumulated amortization (Cr)                       19.750

B. On the balance sheet at the end of the first year, we would subtract those 19.750 to the gross value of the patent and the value of the patent would be

158.000 - 19.750 = 138.250

Net carrying amount of the patent: 138.250