1. Morgan Printers incurred external costs of $1,200,000 for a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Morgan Printers with a competitive advantage for only 12 years. Assuming the straight-line method of amortization, make journal entries to record (a) the purchase of the patent and (b) amortization for year 1.
2. After using the patent for 8 years, Morgan Printers learns at an industry trade show that Superb Printers is designing a more efficient printer. On the basis of this new information, Morgan Printers determines that the expected future cash flows from the patent are only $350,000 and that the patent is worthless on the open market. Is this asset impaired? If so, record the impairment adjusting entry