The intangible assets section of Salmiento Corporation\'s balance sheet at Decem

Question

The intangible assets section of Salmiento Corporation's balance sheet at December 31, 2010, is presented here.


Patent ($60,000 cost less $6,000 amortization) $54,000
Copyright ($36,000 cost less $25,200 amortization)
10,800

Total
$64,800


The patent was acquired in January 2010 and has a useful life of 10 years. The copyright was acquired in January 2004 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2011.

Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company.
Jan.-June Developed a new product, incurring $210,000 in research and development costs. A patent was granted for the product on July 1, and its useful life is equal to its legal life. Legal and other costs for the patent were $20,000.
Sept. 1 Paid $40,000 to a quarterback to appear in commercials advertising the company's products. The commercials will air in September and October.
Oct. 1 Acquired a copyright for $200,000. The copyright has a useful life of 50 years.



1) Prepare journal entries to record the transactions.
2) Prepare journal entries to record the 2011 amortization expense for intangible assets.
3) Prepare the intangible assets section of the balance sheet at December 31, 2011.

Intangible assets:

Patent $
Copyright


Total intangible assets
$

Explanation / Answer

Prepare journal entries to record the 2011 amortization expense for intangible assets. Date Account/Description Debit Credit Dec. 31 Amortization expense-patents Patents (54,000 + 45,000) / 9 = 11,000 20,000 / 20 = 1,000 Dr Patent Amortization 12,000 Cr Patents 12,000 Dec. 31 Amortization expense-copyright Copyright 36,000 / 10 = 3.600 200,000 / 50 = 4,000 Dr Copyright Amortization 7,600 Cr Copyrights 7,600 Prepare the intangible assets section of the balance sheet at December 31, 2011. Intangible assets: Patents . . . . . . . . . . . . . .$125,000 Less: Amortization . . . . . . . 18,000 Net Patents . . . . . . . . . . . . . . . . . . . $107,000 Copyrights . . . . . . . . . . . . 236,000 Less: Amortization . . . . . . . 32,600 Net Copyrights . . . . . . . . . . . . . . . . .. .203,400 Total intangible assets . . . . . . . . . . . .$310,400

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