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

Dec$\mathrm{.}31$ Answer

Rent Expense

Answer

$32,000$

Answer

$0$

Answer

Prepaid Rent

Answer

$0$

Answer

$32,000$

To record rent expense.

Dec$\mathrm{.}31$ Answer

Depreciation Expense $-$ Leasehold Improvements

Answer

Answer

$0$

Answer

Accumulated Depreciation $-$ Leasehold Improvements

Answer

$0$

Answer

To record depreciation of leasehold improvements.

Dec$\mathrm{.}31$ Answer

Amortization Expense $-$ Franchise

Answer

$10,000$

Answer

$0$

Answer

Franchise

Answer

$0$

Answer

$10,000$

To record amortization of franchise.

Dec$\mathrm{.}31$ Answer

Amortization Expense $-$ Trademark

Answer

$460$

Answer

$0$

Answer

Trademark

Answer

$0$

Answer

$460$

To record amortization of trademark.