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Munn Inc. reported other noncurrent asset account balances on December 31, 2020, as follows. Patent $288,000...

Munn Inc. reported other noncurrent asset account balances on December 31, 2020, as follows.

Patent $288,000

Accumulated amortization (36,000)

Net patent $252,000

Transactions during 2021 and other information relating to Munn’s other noncurrent assets include the following.

• The patent was purchased from Grey Company on January 2, 2019, when the remaining legal life was 16 years. On January 1, 2021, Munn determined that the remaining useful life of the patent was only eight years from the date of its acquisition.

• On January 1, 2021, in connection with the purchase of a trademark from Cody Corp., the parties entered into a noncompetition agreement. Munn paid Cody $1,200,000, of which 75% related to the trademark and 25% reflected Cody’s agreement not to compete for a period of five years in the line of business covered by the trademark. Munn considers the life of the trademark to be indefinite.

• Munn incurred the following research and development costs in 2021.

Salaries and related expenses to development of patent $187,500

Supplies 22,500

Allocated facility costs 30,000

Required:

Given the information above, prepare all necessary journal entries.

Solutions

Expert Solution

Petent Purchased from Grey Compnay
Date particulars Amount $ Reference
02-01-2019 Patent Purchased 1,92,000 Consider Usefull life 16 Years
Dep 2019      12,000
31-12-2019 Balance as on 1,80,000
Dep 2020      12,000
31-12-2020 Balance as on 1,68,000 Usefull life consider now 8 years from the date of Acusition hence now only 6 years life pending
Dep 2021      28,000
31-12-2021 Balance as on 1,40,000
Dep 2022      28,000
31-12-2022 Balance as on 1,12,000
Dep 2023      28,000
31-12-2023 Balance as on      84,000
Dep 2024      28,000
31-12-2024 Balance as on      56,000
Dep 2025      28,000
31-12-2025 Balance as on      28,000
Dep 2026      28,000
31-12-2026 Balance as on                -  
Trademarks Mark Purchased from Cody Corp
Date particulars Trademark having infinite life $ NDA Value $
01-01-2021 Trademark purchased                                                 6,00,000                       2,00,000
Amortisation 2021                                                              -                            40,000
31-12-2021 Balance as on                                                 6,00,000                       1,60,000
Amortisation 2022                                                              -                            40,000
31-12-2022 Balance as on                                                 6,00,000                       1,20,000
Amortisation 2023                                                              -                            40,000
31-12-2023 Balance as on                                                 6,00,000                          80,000
Amortisation 2024                                                              -                            40,000
31-12-2024 Balance as on                                                 6,00,000                          40,000
Amortisation 2025                                                              -                            40,000
31-12-2025 Balance as on                                                 6,00,000                                    -  
Acquired non current assets and liability of Amboy Compnay
Date particulars Amount $
01-01-2021 Cash purchase price investment 12,00,000
Less : Fair Value     8,00,000
Goodwill     4,00,000
Internal Generated Patent
particulars Amount $
Salaries and related expenses related to development of petant        1,25,000
supplies            15,000
Allocated facility cost            20,000
Total        1,60,000

Ans 2

Balance sheet presentation of Intangible assets
Particulars Gross Value as on 01/01/2020 Addition Deletion Gross Value as on 31/12/2021 Accumulated Depriciation as on 01/01/2020 Addition Accumulated Depriciation as on 31/12/2021 Net Balance as on 31/12/2021 Net Balance as on 31/12/2020
Purchased Petant                        1,92,000                     -                  -                 1,92,000                       24,000        28,000                   52,000          1,40,000            1,68,000
Trade Mark Purchased                                     -              60,000                -                    60,000                                -                               -                60,000                         -  
NDA Agreement cost                                     -          2,00,000                -                 2,00,000                                -          40,000                   40,000          1,60,000                         -  
internal Generated Petant                                     -          1,60,000                -                 1,60,000                                -                               -            1,60,000                         -  
Goodwill on Purchase of Amboy                                     -          4,00,000                -                 4,00,000                                -                               -            4,00,000                         -  
                       1,92,000        8,20,000                -              10,12,000                       24,000        68,000                   92,000          9,20,000            1,68,000

ekkarill92 answered 2 years ago
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