At the beginning of this year, Brandon Corporation entered into business acquisition. As a result of...

At the beginning of this year, Brandon Corporation entered into business acquisition. As a result of the acquisition, Brandon reported the following intangible assets:

Patent $480,000

Franchise Agreement $350,000

Copyright $150,000

Goodwill $550,000

Total: $1,530,000

The patent expires in 12 years. The franchise agreement expires in 7 years but can be renewed indefinitely at a minimal cost. The copyright is expected to be sold at the end of 20 years for $30,000. Use the straight-line amortization method to calculate the total carrying value of Brandon's intangible assets at the end of the year.

Expert Solution

Amortization is writing down the value of intangible assets over the life of the asset
Formula to calculate annual amortization under straight line method
Amortization expense = (Cost-Salvage value)/Useful life

Calculation of value of patent
Patent	$480,000
Less: Amortization	$40,000	480000/12
Carrying value of patent	$440,000

Calculation of value of franchise agreement
Franchise agreement	$350,000
Less: Amortization	$50,000	350000/7
Carrying value of franchise agreement	$300,000

Calculation of carrying value of copyrights
Copyrights	$150,000
Less: Amortization	$6,000	(150000-30000)/20
Carrying value of copyrights	$144,000

The useful life of goodwill is not given and so it is assumed to have indefinite useful life

Calculation of total carrying value of intangible assets
Patent	$440,000
Franchise agreement	$300,000
Copyrights	$144,000
Goodwill	$550,000
Total carrying value of intangible assets	$1,434,000

The total carrying value of intangible assets at the end of the year is $1,434,000

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