1. © 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO12Record the buying of an intangible asset. LO13Calculate and record amortization expense.

2. © 2014 Cengage Learning. All Rights Reserved. Recording the Buying of an Intangible Asset ●An asset that does not have physical substance is called an intangible asset. ●Intangible assets include patents, copyrights, trademarks, and other similar items. ●The value of an intangible asset such as a patent comes from the rights it gives to the patent holder, not from the piece of paper that ensures those rights. SLIDE 2 LO12 Lesson 19-6

3. © 2014 Cengage Learning. All Rights Reserved. Recording the Buying of an Intangible Asset SLIDE 3 January 2, 20X1. Paid cash for a patent, $45,000.00. Check No. 628. LO12 45,000.00 Patent Line of Credit 45,000.00 1 1 Account Title 2 2 Cost of the Asset 3 3 Cash Paid Lesson 19-6

4. © 2014 Cengage Learning. All Rights Reserved. Calculating and Recording Amortization Expense ●Amortization is the spreading of the cost of an intangible asset over its useful life. ●Amortization is similar to depreciation, which applies only to physical assets. ●Some intangible assets have a legal life, such as a patent. SLIDE 4 LO13 Lesson 19-6

5. © 2014 Cengage Learning. All Rights Reserved. Calculating and Recording Amortization Expense SLIDE 5 LO4 Original Cost− Estimated Salvage Value = Estimated Total Amortization Expense ÷ Years of Estimated Useful Life = Annual Amortization Expense $45,000.00−$0.00=$45,000.00 ÷10=$4,500.00 Lesson 19-6

6. © 2014 Cengage Learning. All Rights Reserved. Calculating and Recording Amortization Expense SLIDE 6 LO13 4,500.00 Amortization Expense Bal.45,000.00 (New Bal.40,500.00) Patent 4,500.00 1 1 Debit Amortization Expense 2 2 Credit Patent Lesson 19-6

7. © 2014 Cengage Learning. All Rights Reserved. Lesson 19-6 Audit Your Understanding 1.Which account is debited when recording amortization on a patent? SLIDE 7 ANSWER Amortization Expense Lesson 19-6

8. © 2014 Cengage Learning. All Rights Reserved. Lesson 19-6 Audit Your Understanding 2.Which account is credited when recording amortization on a patent? SLIDE 8 ANSWER Patent Lesson 19-6