Accounting for Intangible Assets and Leasehold Improvements

Jeffrey Company owns several retail outlets. During the year, it expanded operations and entered into the following transactions:

Jan. $2$ Signed an eight$-$year lease for additional retail space for an annual rent of $$32,000.$ Paid the first year's rent on this date. $($Hint: Debit the first year's rent to Prepaid Rent.$)$

Jan. $3$ Paid $$23,600$ to a contractor for installation of a new oak floor in the leased facility. The oak floor's life is an estimated $50$ years with no salvage value.

Mar. $1$ Paid $$60,000$ to obtain an exclusive area franchise for five years to distribute a new line of gourmet chocolates.

July $1$ Paid $$46,000$ to LogoLab, Inc., for designing a trademark for a new line of gourmet chocolates that Jeffrey will distribute nationally. Jeffrey will use the trademark for as long as the firm remains in business. Jeffrey expects to be in business for at least another $50$ years.

July $1$ Paid $$40,000$ for advertisement in a national magazine $($June issue$)$ introducing the new line of gourmet chocolates at the trademark.

Required

a$.$ Prepare journal entries to record these transactions.

b$.$ Prepare the necessary adjusting entries on December $31$ for these transactions. Jeffrey makes adjusting entries once a year. Jeffrey uses straight$-$line depreciation and amortization.

Round all answers to the nearest dollar.

Transactions

Depreciation & Amortization

General Journal

Date Description Debit Credit

Jan. $2$ Answer

Prepaid Rent

Answer

$32,000$

Answer

$0$

Answer

Cash

Answer

$0$

Answer

$32,000$

To record payment of first year's rent on $8-$ year lease.

Jan. $3$ Answer

Leasehold Improvements

Answer

$23,600$

Answer

$0$

Answer

Cash

Answer

$0$

Answer

$23,600$

To record payment for oak floor installation in leased facility

Mar. $1$ Answer

Franchise

Answer

$60,000$

Answer

$0$

Answer

Cash

Answer

$0$

Answer

$60,000$

To record acquisition of $5-$ year franchise.

July $1$ Answer

Trademark

Answer

$540,000$

Answer

$0$

Answer

Cash

Answer

$0$

Answer

$540,000$

To record payment for design of trademark.

July $1$ Answer

Advertising Expense

Answer

$540,000$

Answer

$0$

Answer

Cash

Answer

$0$

Answer

$540,000$

To record payment for advertising.