Question

The intangible assets section of Sappelt Company at December 31, 2017, is presented below.

Patents ($90,000 cost less $9,000 amortization)                 $81,000

Franchises ($35,000 cost less $14,000 amortization)                         21,000

    Total                  $102,000

The patent was acquired in January 2017 and has a useful life of 10 years. The franchise was acquired in January 2014 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2018.

Jan. 2                     Paid $18,000 legal costs to successfully defend the patent against infringement by another company.

Jan.–June                            Developed a new product, incurring $149,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.

Sept. 1                  Paid $50,000 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October.

Oct. 1                    Acquired a franchise for $130,000. The franchise has a useful life of 50 years.      

Prepare journal entries to record the transactions above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)              

Prepare journal entries to record the 2018 amortization expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Prepare the intangible assets section of the balance sheet at December 31, 2018. (Round answers to 0 decimal places, e.g. 2,125.)

Answer 1

Date	General Journal	Debit	Credit
02-Jan	Legal Fees: Patent	18000
	Cash		18000
Jan - june	R&D	149000
	Cash		149000
01-Sep	Advertising Expense	50000
	Cash		50000
01-Oct	franchise	130000
	Cash		130000
b
	Amortization Expense: Patents	11000
	Acculumated Amoritization: Patents		11000
	90,000/10 +18,000*1/9
	Amortization Expense: Copyrights	4150
	Acculumalted Amoritzation: Copyrights:		4150
	35,000/10+130000/50*3/12
c	Patent	88000
	(90000+18000-9000-11000)
	Franchise	146850
	(130000+35000-14000-4150)
	Total intangible assets	234850