Question

Nash Ltd, incorporated in 2019, has these transactions related to intangible assets in that year:
1 January		Purchased patent (10-year life) for $408,980
1 July		Acquired an existing 6-year franchise (expiration date 1 July 2025) for $352,440
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

Journal entries

No.	Date	Particulars	Debit ($)	Credit ($)
(a)	Jan 1, 2019	Patent	408980
		To Cash		408980
(b)	July 1, 2019	Franchise	352440
		To Cash		352440
(c)	Dec 31, 2019	Amortization expense	70268
		To Patent ($408980 / 10 years)		40898
		To Franchise [($352440 / 6 years) X (6/12 months)]		29370

(If there are any issues or questions, kindly let me know in comments. If the solution is to your satisfaction, a thumbs up would be appreciated. Thank You)