Exercise 12-8

Sheridan Company has provided information on intangible assets as follows. A patent was purchased from Ford Company for $2,663,000 on January 1, 2016. Sheridan estimated the remaining useful life of the patent to be 10 years. The patent was carried in Fords accounting records at a net book value of $2,047,000 when Ford sold it to Sheridan. During 2017, a franchise was purchased from Polo Company for $559,000. In addition, 4% of revenue from the franchise must be paid to Polo. Revenue from the franchise for 2017 was $2,762,000. Sheridan estimates the useful life of the franchise to be 10 years and takes a full years amortization in the year of purchase. Sheridan incurred research and development costs in 2017 as follows.

Materials and equipment $140,900 Personnel 186,400 Indirect costs 100,300 $427,600

Sheridan estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses. On January 1, 2017, because of recent events in the field, Sheridan estimates that the remaining life of the patent purchased on January 1, 2016, is only 5 years from January 1, 2017.

Prepare the intangibles section of Sheridans balance sheet at December 31, 2017. (Enter account name only and do not provide descriptive information.)

SHERIDAN COMPANY Intangibles Section of Balance Sheet For the Month Ended December 31, 2017 December 31, 2017 For the Year Ended December 31, 2017 Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity $ Current Assets Current Liabilities Intangible Assets Long-term Investments Long-term Liabilities Property, Plant and Equipment Stockholders' Equity Total Assets Total Current Assets Total Current Liabilities Total Intangible Assets Total Liabilities Total Liabilities and Stockholders' Equity Total Long-term Investments Total Long-term Liabilities Total Property, Plant and Equipment Total Stockholders' Equity $

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Prepare the income statement effect (related to expenses) for the year ended December 31, 2017, as a result of the facts above. (Enter account name only and do not provide descriptive information.)

SHERIDAN COMPANY Income Statement Effect For the Month Ended December 31, 2017 December 31, 2017 For the Year Ended December 31, 2017 Amortization of franchise Research and development costs Total charged against income Patent from Ford Company Amortization of patent Franchise from Polo Company Payment to Polo Company : Payment to Polo Company Total charged against income Franchise from Polo Company Amortization of patent Patent from Ford Company Research and development costs Amortization of franchise $ Franchise from Polo Company Amortization of franchise Research and development costs Payment to Polo Company Total charged against income Patent from Ford Company Amortization of patent : Patent from Ford Company Amortization of patent Payment to Polo Company Franchise from Polo Company Amortization of franchise Research and development costs Total charged against income $ Franchise from Polo Company Amortization of franchise Amortization of patent Payment to Polo Company Research and development costs Total charged against income Patent from Ford Company Franchise from Polo Company Research and development costs Patent from Ford Company Amortization of patent Total charged against income Payment to Polo Company Amortization of franchise Research and development costs Payment to Polo Company Total charged against income Amortization of patent Patent from Ford Company Franchise from Polo Company Amortization of franchise $

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