On July 1 2018 Graunke Company purchased a patent from Chimney Rock Company for $8000000.It was estimated that the patent has a remaining useful life of 4 years.On July 1 2022 Graunke retired the asset.Use the following tabular analysis to make the adjustment for retirement assuming that the cost has been fully amortized.
A)Increase Expenses and decrease Patents $2000000.
B)Decrease Patents and increase Expenses $1000000
C)Increase Revenues and decrease Patents $8000000.
D)The Patent account would have a zero balance so no entry would be needed.

Question

On July 1 2018 Graunke Company purchased a patent from Chimney Rock Company for $8000000.It was estimated that the patent has a remaining useful life of 4 years.On July 1 2022 Graunke retired the asset.Use the following tabular analysis to make the adjustment for retirement assuming that the cost has been fully amortized. 
A)Increase Expenses and decrease Patents $2000000. 
B)Decrease Patents and increase Expenses $1000000 
C)Increase Revenues and decrease Patents $8000000. 
D)The Patent account would have a zero balance so no entry would be needed.

Quizplus · Accepted Answer

Since the cost of the patent has already been fully amortized, the Patent account would have a zero balance and no entry would be needed for its retirement.

On July 1 2018 Graunke Company Purchased a Patent from Chimney