Chapter 11 Pre-Built Problems Help Save 8 Janes Company provided the following I

Question

Chapter 11 Pre-Built Problems Help Save 8 Janes Company provided the following Information on intangible assets: a. A patent was purchased from the Lou Company for $1,150,000 on January 1, 2016. Janes estimated the remaining useful life of the 10 patent to be 10 years. The patent was carried on Lou's accounting records at a net book value of $440,000 when Lou sold it to Janes. b. During 2018, a franchise was purchased from the Rink Company for $590,000. The contractuol life of the franchise is 10 years and Janes records a full year of amortization in the year of purchase. c. Janes incurred research and development costs in 2018 as follows: $149,000 189,000 69,000 $407,000 Personnel 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 yeers. 1. Prepare the entries necessary for years 2016 through 2018 to reflect the above information 2. Prepare a schedule showing the intangib le asset section of Janes's December 31, 2018, balance sheet s below Complete this question by entering your answers in the tab Required 1 Required 2 Next >

Explanation / Answer

Solution:

1) Preparing the Entries Necessary for Years 2016 Through 2018 to Reflect the Above Information:

Calculation of annual amortization after the estimate change:

2) Preparing a Schedule showing the Intangible Asset Section of Janes December 31, 2018 Balance Sheet:

Partial Balance Sheet

December 31, 2018

Date General Journal Debit Credit Jan 1, 2016 Patent $1,150,000 Cash $1,150,000 (To Record the Purchase of Patent) Dec 31, 2016 Amortization Expense ($1,150,000/10yrs) $115,000 Patent $115,000 (To record amortization on the patent) Dec 31, 2017 Amortization Expense ($1,150,000/10yrs) $115,000 Patent $115,000 (To record amortization on the patent) Dec 31, 2018 Franchise $590,000 Cash $590,000 (To record the purchase of a franchise) Dec 31, 2018 Amortization expense ($590,000/10Yrs) $59,000 Franchise $59,000 (To record amortization of franchise) May 20, 2018 Research and development expense $407,000 Cash $407,000 (To record research and development expenses) Dec 31, 2018 Amortization expense (Calculated Below) $184,000 Patent $184,000 (To record amortization on the patent after change in useful life)

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