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

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.

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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

jeff jeffy answered 8 months ago

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