Question

Nash Ltd, incorporated in 2019, has these transactions related to intangible assets in that year:
1 January		Purchased patent (10-year life) for $404,140
1 July		Acquired an existing 6-year franchise (expiration date 1 July 2025) for $344,520
All costs incurred were for cash and included GST of 10%. Amortisation is calculated on a straight line basis.

Required

a) Prepare the journal to record the purchase of the patent.

b) Prepare the journal to record the purchase of the franchise.

c) Prepare the journal at 31 December 2019 to record the amortisation of the:

                i) patent

                ii) franchise

(Enter debit entries first followed by credit entries. Please include Dr and Cr as appropriate. Narrations are not required).

Answer 1

a)

Date	Account title	Debit	Credit
Jan-01	Dr Patent	$ 404,140
	Cr Cash		$ 404,140

b)

Date	Account title	Debit	Credit
Jul-01	Dr Franchise	$ 344,520
	Cr Cash		$ 344,520

ci)

Date	Account title	Debit	Credit
Dec-31	Dr Amortization expenses ($404,140/10)	$ 40,414
	Cr Patent		$ 40,414

cii)

Date	Account title	Debit	Credit
Dec-31	Dr Amortization expenses ($344,520/6*6/12)	$ 28,710
	Cr Franchise		$ 28,710

You can reach me over comment box, if you have any doubts. please rate this answer