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1. • CommentAuthorjessiarey
   • CommentTimeApr 3rd 2007

    
   im a student and we went over goodwill and patents my question is how do you do a journal entry for both

   Thankful People: jabr
2. • CommentAuthorcajay
   • CommentTimeApr 8th 2007

    
   Patents are intangible assets that generate revenue. They have a useful life, so you have to amortize them.
   Goodwill: Basic example
   Let's say we decide to purchase a company for 8,000,000. If the company is selling for 8,000,000, but the fair market value of the company's net assets(assets-liabilities(7,000,000-2,000,000) ) only add up to 5,000,000, there is a difference of 3,000,000. This amount can be classified as goodwill.
   j/e to purchase company
   Dr. Assets 7,000,000
   Dr. Goodwill 3,000,000
   Cr. Liabilities 2,000,0000
   Cr. Cash 8,000,000
   Goodwill is like buying the company's good name, and also it's future business.
   Goodwill is also not amortized systematically. Goodwill is decreased only when it's value has been determined to be impaired.
   Impairment occurs when the current value of goodwill(fair value of company - fair value of net assets) is less than the carrying value of goodwill.
   
   Hope this helps!!
3. • CommentAuthorcajay
   • CommentTimeApr 8th 2007

    
   j/e for patents:
   
   Purchase of patent on Jan. 01/07 for 120,000 w/ useful life of 3 years.
   01/01/07
   Dr. Patents 120,000
   Cr. Cash 120,000
   12/31/07
   Dr. Amortization Expense 40,000 (120,000/3)
   Cr. Patent 40,000