Amortization of Intangible Assets MicroSystems Inc. acquired a patent for $180,000. MicroSystems amortizes the patent on a straight-line basis over its remaining economic life of 12 years. Required: Prepare the journal entry to record the amortization expense related to the patent. Dec. 31 (Record amortization of patent)

Debit Amortization expense $15,000  

Credit Accumulated amortization $15,000

Being entries to record amortization of patent.

Explanation:

Amortization is the systematic allocation of the cost of an intangible asset such as patent, software etc to the income statement over the estimated useful life of such intangible asset.

The amortization is charged yearly and is determined (using the straight line method) as

= cost/ estimated useful life

= $180,000/12

= $15,000

To record this, the debit amortization expense $15,000 and credit accumulated amortization $15,000

reducing the scale of the market for a new product.