The intangible assets section of El-Gazzar Corporation’s balance sheet at December 31, 2001, is presented here:

The patent was acquired in January 2001 and has a useful life of 10 years. The copyright was acquired in January 1998 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2002:
Jan. 2 Paid $18,000 legal costs to successfully defend the patent against infringement by another company.
Jan.June Developed a new product, incurring $140,000 in research and development costs. A patent was granted for the product on July 1, and its useful life is equal to its legal life.

Sept. 1 Paid $60,000 to a quarterback to appear in commercials advertising the company’s products. The commercials will air in September and October.
Oct Acquired a copyright for $180,000. The copyright has a useful life of 50 years.
Instructions

(a) Prepare journal entries to record the transactions.

(b) Prepare journal entries to record the 2002 amortization expense for intangible assets.

(c) Prepare the intangible assets section of the balance sheet at December 31, 2002.

(d) Prepare the note to the financial statements on El-Gazzar Corporation’s intangible assets as of December 31, 2002.

Transcribed Image Text:

Patent ($60,000 cost less $6,000 amortization) Copyright ($36,000 cost less $14,400 amortization) Total $54,000 21,600 $75,600