9-3 Gill Company, organized in 2017, has the following transactions related to i

Question

9-3 Gill Company, organized in 2017, has the following transactions related to intan- gible assets. Purchased patent (7-year life) Goodwill purchased (indefinite life) 10-year franchise; expiration date 7/1/2027 Research and development costs $595,000 360,000 480,000 185,000 Instructions Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2017, recording any necessary amortization and reflecting all balances accurately as of that date. E9-14 During 2017, Paola Corporation reported net sales of $3,500,000 and net income of $1,500,000. Its balance sheet reported average total assets of $1,400,000. Instructions Calculate the asset turnover

Explanation / Answer

Date Account Debit credit 1/2/7 Patent 595000 cash 595000 [Patent acquired] 4/1/17 Goodwill 360000 cash 360000 [Goodwill purchased] 7//2017 Franchise 480000 cash 480000 [Franchise purchased] 9/1/17 Research and development expense 185000 cash 185000 31 december 2017 Amortisation expense 85000 Accumulated amortisation -patent 85000 [Patent amortised 595000/7] Goodwill will not amortised as it has indefinite life but tested for impairment Amortisation expense 6000 Accumulated amortisation -Franchise [480000*1/10*6/12] 6000 [being amortisation for a period recorded 1 july -31dec] Research and develpment expense is expense in the period of expenditure Patent   [595000-85000] 510000 Goodwill 360000 Franchise [480000-6000] 474000

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