Question

The following information relates to the intangible assets of University Testing Services (UTS): a. On January 1, 2018, UTS completed the purchase of Heinrich Corporation for $3,510,000 in cash. The fair value of the net identifiable assets of Heinrich was $3,200,000. b. Included in the assets purchased from Heinrich was a patent valued at $82,250. The original legal life of the patent was 20 years; there are 12 years remaining, but UTS believes the patent will be useful for only seven more years. c. UTS acquired a franchise on July 1, 2018, by paying an initial franchise fee of $333,000. The contractual life of the franchise is 9 years. 1. Record amortization expense for the intangible assets at December 31, 2018. 2. Prepare the intangible asset section of the December 31, 2018, balance sheet.

Answer 1

a. Purchase price Paid              $	3,510,000
Fair Value of Identifiable Assets $	3,200,000
Goodwill                                  $	310,000
b. Patent                                 $	82,250
Estimated useful life           Years	7
Yearly amortisation                   $	11,750
c. Franchise                             $	333,000
Life of Franchise                 Years	9
Yearly Amortisation                   $	37,000
Amortisation for 2018 ( 6 months)$	18,500

31/12/2018	Amortisation Expense	30,250
	Accumulated Amortisation- Franchise		18,500
	Accumulated Amortisation- Patent		11,750

University Testing Services
Balance sheet
December 31,2018
Intangible assets	$
Goodwill	310,000
Patent	70,500
Franchise	314,500