Question

The following information concerns the intangible assets of Epstein Corporation: On June 30, 2018, Epstein completed the acquisition of the Johnstone Corporation for $2,300,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,950,000. Included in the assets purchased from Johnstone was a patent that was valued at $77,000. The remaining legal life of the patent was 12 years, but Epstein believes that the patent will only be useful for another seven years. Epstein acquired a franchise on October 1, 2018, by paying an initial franchise fee of $198,000. The contractual life of the franchise is 9 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
No journal entry required	0
No journal entry required		0
To record amortization of goodwill.
Amortization expense	5500		=77000/7*6/12
Patent		5500
To record amortization of patent.
Amortization expense	5500		=198000/9*3/12
Franchise		5500
To record amortization of franchise.
2
Balance Sheet
December 31, 2018
Intangible assets:
Goodwill	350000		=2300000-1950000
Patent	71500		=77000-5500
Franchise	192500		=198000-5500
Total intangibles	614000