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

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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

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