adjusting entry?

Question

E10-8 The following are selected 2006 transactions of Yosuke Corporation.
Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.
May 1 Purchased for $60,000 a patent with an estimated useful life of 5 years and a legal life
of 20 years.
Instructions
Prepare necessary adjusting entries at December 31 to record amortization required by the
events above.

Answer 1

Your adjusting entries would look like this:

Dec. 31
Debit Amortization Expense-$12,000
Credit Patent-12,000

You would do nothing with goodwill since the useful life is indefinite. This would only be written down if an impairment test is done and this value is shown to be too high.

Good luck on the test when it comes around. Unfortunately, you'll have to do that one on your own.