Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2017, when it was acquired at a cost of $10.8 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the beginning of 2021.Required: Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate.

The appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:

Amortization Expense Dr. 3 million

                                  Patent Cr. 3 million

Explanation:

In order to Prepare the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate we would have to make the following calculations:

Calculation after the Change:

Original Cost =$10.8 million

Annual Amortization (Old) =$10.8 million/9 = $1.2 million

Amortization till Date (2017 - 2021) = 1.2*4 = 4.8 million

Unamortized Value = 10.8 - 4.8 = 6 million

Remaining Life = 6 - 4 = 2 Years

New Amortization = Unamortized Value/Remaining Life = 6/2 = 3 million

Therefore, the appropriate adjusting entry for patent amortization in 2021 to reflect the revised estimate would be as follows:

Amortization Expense Dr. 3 million

                                  Patent Cr. 3 million

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