The following are selected 2020 transactions of Pedigo Corporation. Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite. May 1 Purchased for $75,000 a patent with an estimated useful life of 5 years and a legal life of 20 years. Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

                              Pedigo Corporation

                                  Journal Entries

                                                                        Debit             Credit

Amortization Expense - Patent                    $10,000        

       Patents (Working 1)                                                       $10,000

To record amortization of Patents on December 31, 2020

Explanation:

Working 1:

Amortization expense = Patent cost x 1/5 year x 8/12 months

                                     = $75,000 x 1/5 x 8/12

                                     = $10,000

Note that no entry is made to to amortize Goodwill worth $150,000. This is because Goodwill has an indefinite life. As only entries to record amortization are required, there is no other entry on December 31, 2020.

answertaxable income;