Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by Farnsworth Company in 2014.
1. Farnsworth developed a new manufacturing process, incurring research and development costs of $110,000. The company also purchased a patent for S50,000. In early January, Farnsworth capitalized $160,000 as the cost of the patents. Patent amortization expense of $16,000 was recorded based on a 10-year useful life.
2. On July 1, 2014, Farnsworth purchased a small company and as a result acquired good will of $200,000. Farnsworth recorded a half-year's amortization in 2014, based on a 50-year life ($2,000 amortization). The goodwill has an indefinite life.
Instructions
Prepare all journal entries necessary to correct any errors made during 2014. Assume the books have not yet been closed for 2014.