Janes Company provided the following information on intangible assets: A) A patent was purchased from the...

Janes Company provided the following information on intangible assets:

A) A patent was purchased from the Lou Company for $750,000 on January 1, 2019. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lou’s accounting records at a net book value of $360,000 when Lou sold it to Janes.

B) During 2021, a franchise was purchased from the Rink Company for $510,000. The contractual life of the franchise is 10 years and Janes records a full year of amortization in the year of purchase.

C) Janes incurred research and development costs in 2021 as follows:

Materials and supplies $ 141,000

Personnel 181,000

Indirect costs 61,000

Total $ 383,000

D) Effective January 1, 2021, based on new events that have occurred, Janes estimates that the remaining life of the patent purchased from Lou is only five more years.

Required:

1. Prepare the entries necessary for years 2019 through 2021 to reflect the above information.

2. Prepare a schedule showing the intangible asset section of Janes’s December 31, 2021, balance sheet.

Solutions

Expert Solution

1	Date	General journal			Debit	Credit
	Jan 1,2019	Patent			750000
		Cash				750000
		(Patent purchased)
	Dec 31,2019	Amortization expense	(750000/10)		75000
		Patent				75000
		(Amortization of patent )
	Dec 31,2020	Amortization expense	(750000/10)		75000
		Patent				75000
		(Amortization of patent )
	Year 2021	Franshise			510000
		Cash				510000
		(Franchise purchased)
	Year 2021	Research and development expense			383000
		Cash				383000
		(R&D expense recorded)
	Dec 31,2021	Amortization expense	(510000/10)		51000
		Franshise				51000
		(Amortization of franchise )
	Dec 31,2021	Amortization expense		(Note:1)	120000
		Patent				120000
		(Amortization of patent )

	Note:1
	Book value of patent as on Dec 31,2021=Cost-Amortization for 2019 and 2020=750000-(75000+75000)=$ 600000
	Estimated remaining life of the patent=5 years
	Amortization for 2021=600000/5=$ 120000

2		Balance sheet (Partial)
			$	$
	Intangible assets:
	Patent	750000-(75000+75000+120000)	480000
	Franchise	(510000-51000)	459000	939000

ekkarill92 answered 1 year ago

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