Question

The following information concerns the intangible assets of Epstein Corporation: On June 30, 2018, Epstein completed the acquisition of the Johnstone Corporation for $1,520,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,300,000. Included in the assets purchased from Johnstone was a patent that was valued at $67,200. The remaining legal life of the patent was 13 years, but Epstein believes that the patent will only be useful for another eight years. Epstein acquired a franchise on October 1, 2018, by paying an initial franchise fee of $168,000. The contractual life of the franchise is 10 years.

Required: 1. Prepare year-end adjusting journal entries to record amortization expense on the intangibles at December 31, 2018.

2. Prepare the intangible asset section of the December 31, 2018, balance sheet.

Answer 1

1
	Debit	Credit
To record amortization of goodwill.
No journal entry required	0
No journal entry required		0
To record amortization of patent
Amortization expense	4200		=67200/8*6/12
Patent		4200
To record amortization of franchise
Amortization expense	4200		=168000/10*3/12
Franchise		4200
2
Balance Sheet
December 31, 2018
Intangible assets:
Goodwill	220000		=1520000-1300000
Patent	63000		=67200-4200
Franchise	163800		=168000-4200
Total intangibles	446800