ACCOUNTING Chapter 11 Homework Question 6 6. value: 5.00 points Janes Company pr

Question

ACCOUNTING Chapter 11 Homework Question 6 6. value: 5.00 points Janes Company provided the following information on intangible assets a. A patent was purchased from the Lou Company for $1,000,000 on January 1, 2014. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lou's accounting records at a net book value of $410,000 when Lou sold it to Janes b. During 2016, a franchise was purchased from the Rink Company for $560,000. The contractual life of c. Janes incurred research and development costs in 2016 as follows: the franchise is 10 years and Janes records a full year of amortization in the year of purchase Materials and supplies Personnel Indirect costs $146,000 186,000 66,000 Total $398,000 d. Effective January 1, 2016, 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 2014 through 2016 to reflect the above information. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Janes Company Journal Entries Date Particular Amount (Dr) Amount (Cr) a) 1.01.2014 Patent A/c $        10,00,000.00 To Cash $      1,00,000.00 (Being amount of Patent Purchased) 31.12.2014 Amortization Expense $          1,00,000.00    To Patent($1000000/10) $      1,00,000.00 (Being amount of Amortization of Patent) 31.12.2015 Amortization Expense $          1,00,000.00    To Patent($1000000/10) $      1,00,000.00 (Being amount of Amortization of Patent) b) 2016 Franchise $          5,60,000.00      To Cash $      5,60,000.00 (Being amount of Franchise Purchased) 31.12.2016 Amortization Expense($560000/10) $              56,000.00    To Franchise $          56,000.00 (Being amount of Amortization of Franchise) c ) Research & Development Cost Material & Supplies $          1,46,000.00 Personnel $          1,86,000.00 Indirect Cost $              66,000.00 Total $          3,98,000.00 31.12.2016 Research & Development $          3,98,000.00     To Cash $      3,98,000.00 (Being amount of R& D cost) d) Book Value of Patent=($1000000-$100000-$100000) $          8,00,000.00 31-12-2016 Amortization Expense($800000/5) $          1,60,000.00     To Patent $      1,60,000.00 (Being amount of Amortization of Patent of remaining useful life of 5 years Intangible Section of Balance Sheet Balanc Sheet December 31,2016 Intangible Assets Patent($1000000-$100000-$100000-$160000) $          6,40,000.00 Franchise($560000-$56000) $          5,04,000.00 Total $        11,44,000.00

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