Question

Marigold Enterprises has a December 31 fiscal year end and uses straight-line amortization to the nearest month for its finite-life intangible assets. The company has provided you with the following information related to its intangible assets and goodwill during 2020 and 2021:

2020
Jan. 9		Purchased a patent with an estimated useful life of 5 years and a legal life of 20 years for $45,000 cash.
May 15		Purchased another company and recorded goodwill of $490,000 as part of the purchase.
Dec. 31		Recorded adjusting entries as required for amortization.
Dec. 31		Tested assets for impairment and determined the patent and the goodwill's recoverable amounts were $40,000 and $440,000, respectively.

2021
Jan. 2		Incurred legal fees of $16,000 to successfully defend the patent.
Mar. 31		Incurred research costs of $171,000.
Apr. 1		Purchased a copyright for $66,000 cash. The company expects the copyright will benefit the company for 10 years.
July 1		Purchased a trademark with an indefinite expected life for $210,000 cash.
Dec. 31		Recorded adjusting entries as required for amortization.

1.) Record the transactions and adjusting entries as required. (2020,2021)

2.) Show the balance sheet presentation of the intangible assets and goodwill at December 31, 2021.

Answer 1

1) Journal Entries

Date	Accounts	Debit	Credit
Jan 9, 2020	Patents	45,000
	Cash		45,000
	(to record purchase of Patent as asset)
May 15, 2020	Goodwill	490,000
	Business Purchase		490,000
	(to record purchase of goodwill at the time of purchase of another company)
Dec 31, 2020	Amortization Expense	9,000
	Accumulated amortization		9,000
	(to record the amortization of Patents in straight line basis over 5 years)
Dec 31, 2020	Impairment Loss	40,000
	Goodwill		40,000
	(to record impairment loss based on the recoverable amount of goodwill)
Jan 2, 2021	Patent	16,000
	Cash		16,000
	(to capitalize the legal fees paid to successfully defend the patent)
Mar 31, 2021	Research Expense	171,000
	Cash		171,000
	(to record research cost as expense)
Apr 1, 2021	Copyrights	66,000
	Cash		66,000
	( to record purchase of copyright)
July 1, 2021	Trademark	210,000
	Cash		210,000
	(to record the purchase of trademark)
Dec 31, 2021	Amortization Expense	19,600
	Accumulated amortization		19,600
	(to record the amortization of Patents in straight line basis over 5 years and amortization of Copyrights over 10 years)

2) BalanceSheet Presentation of the intangible assets and goodwill at December 31, 2021

Particulars	Amount	Amount
Goodwill		450,000
Trademark		210,000
Patent	61,000
Less: Accumulated amortization	-22,000	39,000
Copyrights	66,000
Less: Accumulated amortization	-6,600	59,400
Total Intangible Assets (net)		758,400

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