Question

The following transactions involving intangible assets of Francis Corporation occurred on or near December 31, 2020. Prepare the journal entry(ies) needed at that date to record the transaction, and at December 31, 2021 to record any resultant amortization. If no entry is required at a particular date, write "None needed."

1) Francis paid Jericho Company $ 200,000 for the exclusive right to market a particular product, using the Jericho name and logo in promotional material. The franchise runs for as long as Francis is in business. Francis decided to amortize the franchise over 25 years.

2) Francis spent $ 300,000 developing a new manufacturing process and has applied for a patent. It believes that its application will be successful and that the process will be successfully implemented and used for 10 years.

3) Francis spent $ 300,000 developing a new manufacturing process and has applied for a patent. It believes that its application will be successful and that the process will be successfully implemented and used for 10 years.

4) Francis incurred $ 90,000 in successfully defending another of its patents in an infringement suit. The patent expires during December 2024.

5) Francis incurred $ 200,000 in an unsuccessful patent defence. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $ 99,000, is deemed worthless.

6) Francis paid Mexico Laboratories $ 52,000 for research work performed by Mexico under contract for Francis.

Answer 1

December 31,2020
Transaction	Account Titles	Debit $	Credit $
1	Franchise	200,000
	Cash		200,000
2	Patents*	300,000
	Cash		300,000
3	Patents*	300,000
	Cash		300,000
4	Patents	90,000
	Cash		90,000
5	Legal fees expense	200,000
	Cash		200,000
	Patents expense	99,000
	Patents		99,000
6	Research and Development expense	52,000
	Cash		52,000
December 31,2021
Transaction	Account Title	Debit $	Credit $
1	No entry needed
2	Amortization expense	30,000
	Patents (300,000 /10 )		30,000
3	Amortization expense	30,000
	Patents (300,000 /10 )		30,000
4	Amortization expense	22,500
	Patents (90,000 / 4 )		22,500
5	No entry needed
6	No entry needed

*Assuming patents has been successfully registered .