Reference no: EM131806836

Question - Day Co. purchased a patent from Night Co. for $60,000 on July 1, 2012. The measurement of amortization of intangibles begins on the date of acquisition. For any amounts subsequently capitalized, the start of the amortization for those amounts to be amortized is the date(s) of capitalization. Day Co. is on a calendar year and prepares adjusting journals only on December 31 of each year. Day amortizes intangibles using the straight-line method. Expenditures of $20,000 for successful litigation in defense of the patent were paid on July 1, 2015, by Day Co. On July 1, 2015, Day spent $20,000 searching for new applications for the product that is patented. Day Co. estimated the useful life of the patent to be 10 years from the date of acquisition. The remaining legal life of the patent is 12 years from the date of acquisition. If necessary, round all amounts to the nearest dollar.

Required: Compute the carrying value of the patent as of December 31, 2015 after year-end adjusting journal entries.