Answer:
Tabitha Co.
The gain recorded on the sale of the patent is:
= $7,933
Explanation:
a) Data and Calculations:
June 2, 2021, Purchase of Franchise for $586,000
Period of franchise = 5 years
September 1, 2023, Sale of Franchise for $340,000
Annual amortization expense = $117,200 ($586,000/5)
Amortization Schedule:
June 2, 2021 to December 31, 2021 = $58,600 ($117,200/2)
Jan. 1, 2022 to December 31, 2021 = $117,200
Jan. 1, 2023 to September 1, 2023 = $78,133 ($117,200 * 8/12)
Total amortization during the period = $253,933
Initial cost = $586,000
Accumulated amortization = $253,933
Reduced book value = $332,067
Sales proceed = $340,000
Gain from sales = $7,933 ($340,000 - $332,067)
