Exercise 9-12 On January 1, 2017, Ivanhoe Company had a balance of $371,500 of g
ID: 2549174 • Letter: E
Question
Exercise 9-12 On January 1, 2017, Ivanhoe Company had a balance of $371,500 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year The goodwill had an indefinite ife. During 2017, the company had the following additional transactions. Jan. 2 July 1 Sept. 1 Purchased a patent (5-year life) $334,950 Acquired a 9-year franchise; expiration date July 1, 2,026, $590,400. Research and development costs $184,000. Prepare the necessary entries to record the transactions related to intangibles. All costs incurred were for cash. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: APPLIED SKILLS VIDEO: SIMILAR EXERCISEExplanation / Answer
Journal Entries for purchase
Date
Particulars
Debit
Credit
Jan 2
Intangibles – Patent
TO Cash
(Being Patent acquired)
334,950
334,950
July 1
Intangibles – Franchise
TO Cash
(Being Franchise purchased)
590,400
590,400
Sept 1
Research & Development Expense
TO Cash
(Being expense booked for R&D cost)
184,000
184,000
NOTE: Reserach & Development expense will be booked as regular expense in Profit & Loss statement unless the commercial feasibility of the project is established. Since the same is not given, we will consider it expense
Amortization Expense
Date
Particulars
Debit
Credit
Dec 31
Amortization Expense
TO Patents (334950 / 5)
TO Franchise (590400 / 9 = 65600 / 12 x 6)
99790
66,990
32800
Balances on Intangibles
Patent = 334950 - 66990 = 267960
Franchise = 590400 - 32800 = 557600
Date
Particulars
Debit
Credit
Jan 2
Intangibles – Patent
TO Cash
(Being Patent acquired)
334,950
334,950
July 1
Intangibles – Franchise
TO Cash
(Being Franchise purchased)
590,400
590,400
Sept 1
Research & Development Expense
TO Cash
(Being expense booked for R&D cost)
184,000
184,000
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