Bailey Company was formed in January 2014 and is preparing its financial statements under GAAP for the first time at the end of 2016. Its general ledger at December 31, 2016, includes the following assets:

Patent	$120,000
Copyright	140,000
Trade name	150,000
Computer software	90,000
Start-up costs	30,000
Intellectual capital	150,000
Goodwill	90,000

As the recently hired accountant for Bailey, you have been asked to make sure that the companys accounting for intangible assets follows GAAP. Based on your investigation, you determine the following:

	The patent acquired in January 2016 has an expected life of 15 years and no residual value, and it will generate approximately equal benefits each year.
	Bailey will use the copyright and trade name for the foreseeable future.
	The computer software was purchased in January 2016 and is used in the Baileys 20 offices around the country. It is expected to be replaced with new software at the beginning of 2018.
	Bailey previously capitalized the expected value of its human resources as intellectual capital, with a corresponding increase in additional paid-in capital.
	The trade name and goodwill arose from an acquisition of a subsidiary company at the end of 2015. Because of a significant adverse change in the market, you decide that both assets are impaired. You estimate that the fair value of the trade name is $50,000. The subsidiary company, which qualifies as a reporting unit, has a book value of $500,000, including the goodwill of $90,000. You estimate that the subsidiarys fair value is $300,000, of which $250,000 is allocated to its identifiable assets and liabilities.

Required:

Assume no adjusting entries have been made. Prepare journal entries to provide the correct information under GAAP at the end of 2016.

CHART OF ACCOUNTS

Bailey Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
171	Equipment
179	Accumulated Depreciation
181	Patent
184	Goodwill
186	Computer Software
187	Trade Name
188	Intellectual Capital
189	Start-up Costs

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
313	Additional Paid-In Capital
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
533	Amortization Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
891	Loss on Impairment
910	Income Tax Expense