Question

Nash Ltd, incorporated in 2019, has these transactions related to intangible assets in that year:
1 January		Purchased patent (10-year life) for $408,980
1 July		Acquired an existing 6-year franchise (expiration date 1 July 2025) for $352,440
All costs incurred were for cash and included GST of 10%. Amortisation is calculated on a straight line basis.

Required

a) Prepare the journal to record the purchase of the patent.

b) Prepare the journal to record the purchase of the franchise.

c) Prepare the journal at 31 December 2019 to record the amortisation of the:

                i) patent

                ii) franchise

(Enter debit entries first followed by credit entries. Please include Dr and Cr as appropriate. Narrations are not required).

Answer 1

Journal entries - Nash Ltd
Date		Accounts	Debit	Credit
2019
JAN	1	Patent   A/C DR	$ 4,08,980
		To Cash		$ 4,08,980
		Purchased patent
July	1	Franchise Dr	$ 3,52,440
		To Cash		$ 3,52,440
		Purchased franchise
Dec.	31	Amortization expense Dr	$    40,898
		To Accumilated amortization -Patent		$    40,898
		To record annual amortization expense. =408980/10
Dec.	31	Amortization expense Dr	$    58,740
		To Accumilated amortization - Franchise		$    58,740
		To record annual amortization expense. 352440/6
Dec.	31	Profit and loss A/C    Dr	$    40,898
		To Amortization expense		$    40,898
		(being the amortization expense on patent charged to profit and loss account)
Dec.	31	Profit and loss A/C    Dr	$    58,740
		To Amortization expense		$    58,740
		(being the amortization expense on franchise charged to profit and loss account)
Assumption :
	Assume GST credit not availed.