Question
Intangibles: Balance Sheet Presentation and Income Statement Effects Binson Company has provided information on intangible assets as follows: A patent was purchased from Lou Company
Intangibles: Balance Sheet Presentation and Income Statement Effects
Binson Company has provided information on intangible assets as follows:
- A patent was purchased from Lou Company for $1,245,000 on January 1, 2018. Binson 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 $1,005,000 when Lou sold it to Binson.
- During 2019, a franchise was purchased from Rink Company for $330,000. In addition, 6% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,200,000. Binson estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase.
- Binson incurred R&D costs in 2019 as follows:
Binson estimates that these costs will be recouped by December 31, 2020.Materials and equipment $144,000 Personnel 178,000 Indirect costs 58,000 $380,000 - On January 1, 2019, Binson 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 a schedule showing the intangibles section of Binson's balance sheet at December 31, 2019.
| Binson Company | |
| Intangible Assets Section of Balance Sheet | |
| December 31, 2019 | |
| Patent, net (Schedule 1) | $fill in the blank 1965670b9fcb046_1 |
| Franchise from Rink Company, net (Schedule 2) | fill in the blank 1965670b9fcb046_2 |
| Intangible assets | $fill in the blank 1965670b9fcb046_3 |
| Schedule 1: Computation of Patent from Lou Company | |
| Cost of patent at date of purchase | $fill in the blank 1965670b9fcb046_4 |
| Amortization of patent for 2018 | fill in the blank 1965670b9fcb046_5 |
| $fill in the blank 1965670b9fcb046_6 | |
| Amortization of patent for 2019 | fill in the blank 1965670b9fcb046_7 |
| Patent balance | $fill in the blank 1965670b9fcb046_8 |
| Schedule 2: Computation of Franchise from Rink Company | |
| Cost of franchise at date of purchase | $fill in the blank 1965670b9fcb046_9 |
| Amortization of franchise for 2019 | fill in the blank 1965670b9fcb046_10 |
| Franchise balance | $fill in the blank 1965670b9fcb046_11 |
2. Prepare a schedule showing the income statement effects for the year ended December 31, 2019, as a result of the previously mentioned facts.
| Binson Company | ||
| Income Statement Effects | ||
| For the Year Ended December 31, 2019 | ||
| Patent from Lou Company: | ||
| $fill in the blank 93478a054fce074_2 | ||
| Franchise from Rink Company: | ||
| $fill in the blank 93478a054fce074_4 | ||
| fill in the blank 93478a054fce074_6 | fill in the blank 93478a054fce074_7 | |
| fill in the blank 93478a054fce074_9 | ||
| Total expenses | $fill in the blank 93478a054fce074_10 | |
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Fundamental Accounting Principles
Authors: John Wild, Ken Shaw, Barbara Chiappetta
22nd edition
9781259566905, 978-0-07-76328, 77862279, 1259566900, 0-07-763289-3, 978-0077862275
