Reference no: EM133147624

Question - Green Gables Ltd. (GGL), a publicly traded company, had the following transactions: On January 1, Year 1, GGL purchased a patent for $200,000 with 15 years remaining of its legal life. GGL expects to use the patent technical knowledge in its new product line for 10 years, with forecasted profits of $1,000,000. GGL believes they should be able to sell the patent for $15,000 after the 10 years; however, there currently is no active market for the patent. On July 1, Year 3, GGL receives an offer to sell the patent for $280,000 and accepts the offer. In February of Year 2, GGL spends $50,000 sending eight of its key managers to a week-long process excellence training specialized for its industry. GGL is excited about this training and expects it will result in annual cost savings of $30,000 over five years from key manufacturing process improvements implemented throughout that time by the managers. GGL has a December 31 year end and amortizes its assets using the straight-line method.

Required -

a) Discuss whether the patent and the training meet the definition of an intangible asset.

b) Prepare all journal entries for GGL related to the patent for Year 1 and Year 3.