Janes Company provided the following information on intangible assets: a. A pate

Question

Janes Company provided the following information on intangible assets: a. A patent was purchased from the Lou Company for $800,000 on January 1, 2016. Janes estimated the remaining useful life of the b. During 2018, a franchise was purchased from the Rink Company for $520,000. The contractual life of the franchise is 10 years and c. Janes incurred research and development costs in 2018 as follows: patent to be 10 years. The patent was carried on Lou's accounting records at a net book value of $370,000 when Lou sold it to Janes. Janes records a full year of amortization in the year of purchase. Materials and supplies Personnel Indirect costs $142,000 182,000 62,000 $386,000 Total d. Effective January 1, 2018, based on new events that have occurred, Janes estimates that the remaining life of the patent purchased from Lou is only five more years Required: 1. Prepare the entries necessary for years 2016 through 2018 to reflect the above information. 2. Prepare a schedule showing the intangible asset section of Janes's December 31, 2018, balance sheet.

Explanation / Answer

Answer 1. Journal Entry S. No. Date Particulars Dr. Amt. Cr. Amt. a. 1-Jan-16 Patent    800,000.00    Cash    800,000.00 (To record the purchase of patents) 31-Dec-16 Amortization Expenses      80,000.00 $800,000 / 10 Years    Patent      80,000.00 (To record the amortization expense) 31-Dec-17 Amortization Expenses      80,000.00 $800,000 / 10 Years    Patent      80,000.00 (To record the amortization expense) b. 2018 Franchisee    520,000.00    Cash    520,000.00 (To record the purchase of franchisee) 31-Dec-18 Amortization Expenses      52,000.00 $520,000 / 10 Years    Franchisee      52,000.00 (To record the amortization expense) c. 2018 Research & Development Expenses    386,000.00    Cash    386,000.00 (To record the R& D Expenses) d. 31-Dec-18 Amortization Expenses    128,000.00 ($800,000 - $160,000) / 5 Years    Patent    128,000.00 (To record the amortization expense) Answer 2. Partial Balance Sheet Dec 31, 2018 Intangible Assets: Patents ($800,000 - $288,000)    512,000.00 Franshisee ($520,000 - $52,000)    468,000.00 Total Intangibles    980,000.00

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