Chapter 3
Long-Term Assets
126
AP-12B (
6
)
On August 1, 2016, Watertown Inc. purchased a trademark from Savanah Corp. for $410,000.
The company paid $265,000 cash and issued a note payable for the remaining balance.
The trademark has a useful life of 12 years but Watertown plans to sell the trademark after
eight years because it anticipates technological changes in the market that will render the
trademark obsolete.
Required
a) Prepare the journal entry for the purchase of the trademark and the entry required to
record amortization for the first year on December 31, 2016.
Date
Account Title and Explanation
Debit
Credit
b) Prepare the journal entry to record amortization for the second year on
December 31, 2017.
Date
Account Title and Explanation
Debit
Credit
