Bright Designs Ltd. began operations in 20X5 and, at the end of its first year of operations, reported a balance of $601,500 in an account called “intangibles.” Upon further investigation, it is discovered that the account had been debited throughout the year as follows:

Required:

1. Prepare a correcting entry that reallocates all amounts charged to intangibles to the appropriate accounts. State any assumptions made.

2. Calculate amortization expense on intangible assets for 20X5. Straight line amortization, to the exact month of purchase, is used. All residual values are expected to be zero.

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5 Jan. Organization costs; legal fees. Economic life is indefinite. $ 10,000 1 Feb. Patent registration; legal fees re: patent with 20-year life to be used 5,000 in research activities. 1 July Operating expenses, first six months. 220,000 1 Aug. Goodwill; excess of purchase price of an advertising company paid 160,000 over tangible assets acquired. 10 Nov. Copyright acquired; remaining legal life is 29 years but economic 21,000 life is 10 years. 30 Nov. Trademark registration; legal fees. The trademark is expected to 8,000 have an indefinite economic life. 5 Dec. Staff training costs; staff is expected to stay with the company for an average of three years; however, there are no employment contracts. 27,500 31 Dec. Research costs incurred over the year, 40% of all research costs are properly classified as capitalizable development costs. The product developed will begin commercial production next year. 150,000 $601,500