During 2007, Thompson Corporation spent $170,000 in research and development costs. As a result, a new product called the New Age Piano was patented. The patent was obtained on October 1, 2007, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $24,000 related to the patent were incurred as of October 1, 2007.
a. Prepare all journal entries required in 2007 and 2008 as a result of the transactions above.
b. On June 1, 2009, Thompson spent $12,400 to successfully prosecute a patent infringement suit. As a result, the estimate of useful life was extended to 12 years from June 1, 2009. Prepare all journal entries required in 2009 and 2010.
c. In 2011, Thompson determined that a competitor's product would make the New Age Piano obsolete and the patent worthless by December 31, 2012. Prepare all journal entries required in 2011 and 2012.
The solution explains the journal entries relating to accounting for patents