Question

Information concerning Cheyenne Corporation’s intangible assets is as follows. 1. On January 1, 2020, Cheyenne signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $50,000. Of this amount, $10,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $10,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 10% (the implicit rate for a loan of this type) is $31,700. The agreement also provides that 4% of the revenue from the franchise must be paid to the franchisor annually. Cheyenne’s revenue from the franchise for 2020 was $900,000. Cheyenne estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Cheyenne incurred $60,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2020. Legal fees and other costs associated with registration of the patent totaled $22,400. Cheyenne estimates that the useful life of the patent will be 8 years. 3. A trademark was purchased from Shanghai Company for $44,000 on July 1, 2017. Expenditures for successful litigation in defense of the trademark totaling $11,900 were paid on July 1, 2020. Cheyenne estimates that the useful life of the trademark will be 20 years from the date of acquisition.

(a) Your answer is correct. Prepare a schedule showing the intangible assets section of Cheyenne’s balance sheet at December 31, 2020. CHEYENNE CORPORATION Intangible Assets choose the accounting period For the Year Ended December 31, 2020December 31, 2020For the Month Ended December 31, 2020 select a balance sheet item Patent AmortizationTrademark AmortizationTotal Intangible AssetsPatentTrademarkLegal FeesFranchise FeeFranchiseFranchise AmortizationResearch and Development Costs $enter a dollar amount select a balance sheet item Franchise AmortizationPatentTotal Intangible AssetsTrademarkResearch and Development CostsTrademark AmortizationLegal FeesPatent AmortizationFranchiseFranchise Fee enter a dollar amount select a balance sheet item Trademark AmortizationResearch and Development CostsPatent AmortizationLegal FeesPatentFranchise FeeTotal Intangible AssetsFranchise AmortizationTrademarkFranchise enter a dollar amount select a closing section name         Patent    Trademark    Franchise Amortization    Legal Fees    Total Intangible Assets    Patent Amortization    Franchise Fee    Research and Development Costs    Trademark Amortization    Franchise $enter a total amount for this section SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 3 of 5 used

(b) Your answer is partially correct. Try again. Prepare a schedule showing all expenses resulting from the transactions that would appear on Cheyenne’s income statement for the year ended December 31, 2020. CHEYENNE CORPORATION Expenses Resulting from Selected Intangible Assets Transactions choose the accounting period December 31, 2020For the Year Ended December 31, 2020For the Month Ended December 31, 2020 select a balance sheet item Franchise AmortizationResearch and Development CostsTotal Intangible AssetsInterest ExpensePatent AmortizationTrademark AmortizationFranchisePatentTrademarkLegal FeesFranchise Fee $enter a dollar amount select a balance sheet item Research and Development CostsFranchise AmortizationTotal Intangible AssetsPatent AmortizationTrademark AmortizationFranchise FeePatentInterest ExpenseFranchiseTrademarkLegal Fees enter a dollar amount select a balance sheet item Interest ExpenseFranchise FeeTotal Intangible AssetsLegal FeesPatentTrademark AmortizationFranchise AmortizationPatent AmortizationTrademarkFranchiseResearch and Development Costs enter a dollar amount select a balance sheet item Franchise AmortizationTrademarkResearch and Development CostsFranchise FeeTotal Intangible AssetsPatent AmortizationTrademark AmortizationInterest ExpensePatentFranchiseLegal Fees enter a dollar amount select a balance sheet item Trademark AmortizationTrademarkPatent AmortizationTotal Intangible AssetsInterest ExpenseFranchiseResearch and Development CostsPatentLegal FeesFranchise FeeFranchise Amortization enter a dollar amount select a closing section name     Total Intangible Assets    Patent    Trademark Amortization    Franchise    Interest Expense    Research and Development Costs    Franchise Amortization    Trademark    Legal Fees    Franchise Fee    Patent Amortization     $enter a total amount for this section

Answer 1