ACCOUNTING PROBLEM HELP?

[arrigo]

The intangible assets section of Redeker Company at December 31, 2011, is presented below.
Patent ($75,820 cost less $7,580 amortization) $68,240
Franchise ($52,500 cost less $21,000 amortization) 31,500

Total $99,740



The patent was acquired in January 2011 and has a useful life of 10 years. The franchise was acquired in January 2008 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2012.

Jan. 2 Paid $44,550 legal costs to successfully defend the patent against infringement by another company.
Jan.-June Developed a new product, incurring $135,620 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.
Sept. 1 Paid $53,980 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October.
Oct. 1 Acquired a franchise for $114,000. The franchise has a useful life of 50 years.







CORRECT:

Prepare journal entries to record the transactions above.
Date Account/Description Debit Credit
Jan. 2 Patents 44550
Cash 44550
Jan. - June Research and dev. expense 135620
Cash 135620
Sept. 1 Advertising expense
Cash
Oct. 1 Franchise 114000
Cash 114000








Incorrect.

Prepare journal entries to record the 2012 amortization expense.
Date Account/Description Debit Credit
Dec. 31 Amortization expense-Patents
Patents
(To record patents.)
Dec. 31 Amortization expense-Franchise
Franchise
(To record franchise.)








Incorrect.

Complete the intangible assets section of the balance sheet at December 31, 2012.
Intangible Assets
Patents $
Franchise

$



HOW DO YOU FIND THE AMORTIZATIONS?!

[ammi]

Prepare journal entries to record the 2012 amortization expense.
Dec. 31 Amortization expense-Patents $12,037 (see working below)
Patents $12,037
(To record patents.)

Patent brought forward $75,820
+ $44,550 legal costs to successfully defend the patent
= $120,370; amortization is $120,370/10 = $12,037**

**Not sure if this requires rounding. $75,820 over 10 years should give you $7,582, but they had used $7,580 in the question.


Dec. 31 Amortization expense-Franchise $5,820
Franchise $5,820
(To record franchise.)

Franchise b/f $52,500; amortization on this is $5,250
Oct. 1 Acquired a franchise for $114,000. The franchise has a useful life of 50 years.
Amortization on this is $114,000/50 years x 3/12 (3 months) = $570 (pls check your textbook. If it says maximum allowed is 40 years, then adjust accordingly)
Total amortization for franchise $5,820

Hope this helped