Celine Dion Corporation purchases a patent from Salmon Company
on January 1, 2012, for $50,820. The patent has a remaining legal life
of 16 years. Celine Dion feels the patent will be useful for 10 years.
Prepare Celine Dion’s journal entries to record the purchase of the
patent and 2012 amortization.
Question 24
Karen Austin Corporation has capitalized software costs of $768,500,
and sales of this product the first year totaled $390,630. Karen Austin
anticipates earning $911,470 in additional future revenues from this
product, which is estimated to have an economic life of 4 years.
Compute the amount of software cost amortization for the first year.
(a) Compute the amount of software cost amortization for the first
year using the percent of revenue approach.
(b) Compute the amount of software cost amortization for the first
year using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land which borders on the right-ofway of the Northern Railroad. On August 10, 2012, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Beck had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Beck in exchange for a release of
his right to reimbursement for the loss he has sustained from the fire.
Beck appears inclined to accept the Railroad’s offer. The Railroad’s
2012 financial statements should include the following related to the
incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and creation of a liability for the value of the
land.
Question 26