Intangibles: Balance Sheet Presentation and Income Statement Effects Barb Company has provided information on intangible assets as follows: 1. A patent was purchased from Lou Company for $1,500,000 on January 1, 2018. Barb estimated the remaining useful life of the patent to be 10 years. The patent was carried in Lou's accounting records at a net book value of $1,250,000 when Lou sold it to Barb. 2. During 2019, a franchise was purchased from Rink Company for $500,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,000,000. Barb estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase. 3. Barb incurred R&D costs in 2019 as follows: Materials and equipment Personnel $120,000 140,000 60,000 $320,000 Indirect costs Barb estimates that these costs will be recouped by December 31, 2020. 4. On January 1, 2019, Barb estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 5 years from January 1, 2019 Required: 1. Prepare the intangibles assets section of Barb's balance sheet at December 31, 2019. BARB COMPANY Intangible Assets Section of Balance Sheet December 31, 2019 Patent, net (Schedule 1) X Franchise from Rink Company, net (Schedule 2) 450,000 Intangible assets Schedule 1: Computation of Patent from Lou Company Cost of patent at date of purchase Amortization of patent for 2018 Amortization of patent for 2019 Patent balance Schedule 2: Computation of Franchise from Rink Company Cost of franchise at date of purchase Amortization of franchise for 2019 Franchise balance Food 2. Prepare a schedule showing the income statement effects for the year ended December 31, 2019, as a result of the previously mentioned facts. BARB COMPANY Income Statement Effects For the Year Ended December 31, 2019 Patent from Lou Company: Amortization of patent for 2019 (Schedule 1) Franchise from Rink Company: Amortization of franchise for 2019 (Schedule 2) 50,000 Payment to Rink 100,000 320,000 Research and Development Costs Total expenses Feedback