The intangible assets and goodwill reported by Ip Company at December 31, 2020, follow:

Patent #1 was acquired in January 2019 and has an estimated useful life of 10 years. Copyright #1 was acquired in January 2015 and also has an estimated useful life of 10 years. The following cash transactions may have affected intangible assets and goodwill during the year 2021:

Jan. 2 Paid $23,200 of legal costs to successfully defend Patent #1 against infringement by another company.

June 30 Developed a new product, incurring $180,000 in research costs and $60,000 in development costs, which were paid in cash. The development costs were directly related to Patent #2, which was granted for the product on July 1. Its estimated useful life is equal to its legal life of 20 years.

Sept. 1 Paid $12,000 to an Olympic athlete to appear in commercials advertising the company?s products. The commercials will air in September.

Oct. 1 Acquired a second copyright for $18,000 cash. Copyright #2 has an estimated useful life of six years.

Instructions

a. Record the above transactions.

b. Prepare any adjusting journal entries required at December 31, 2021, the company?s year end, and update the account balances.

c. Show how the intangible assets and goodwill will be reported on the balance sheet at December 31, 2021.

Since intangible assets do not have physical substance, why are they considered to be assets?

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Patent #1 Less: Accumulated amortization Copyright #1 Less: Accumulated amortization Goodwill $80,000 $ 64,000 48,000 28,800 19,200 220,000 $303,200 Total