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Intangibles: Balance Sheet Presentation and Income Statement Effects Bringle Company has provided information on intangible assets as follows: A patent was purchased from Lou Company
Intangibles: Balance Sheet Presentation and Income Statement Effects
Bringle Company has provided information on intangible assets as follows:
- A patent was purchased from Lou Company for $1,665,000 on January 1, 2018. Bringle estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of $1,315,000 when Lou sold it to Bringle.
- During 2019, a franchise was purchased from Rink Company for $590,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $1,700,000. Bringle estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase.
- Bringle incurred R&D costs in 2019 as follows:
Materials and equipment $126,000 Personnel 157,000 Indirect costs 54,000 $337,000 - On January 1, 2019, Bringle estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 10 years from January 1, 2019.
Required:
1. Prepare a schedule showing the intangibles section of Bringle's balance sheet at December 31, 2019.
Bringle Company | |
Intangible Assets Section of Balance Sheet | |
December 31, 2019 | |
Patent, net (Schedule 1) | $ |
Franchise from Rink Company, net (Schedule 2) | |
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 | $ |
2. Prepare a schedule showing the income statement effects for the year ended December 31, 2019, as a result of the previously mentioned facts.
Bringle Company | ||
Income Statement Effects | ||
For the Year Ended December 31, 2019 | ||
Patent from Lou Company: | ||
$ | ||
Franchise from Rink Company: | ||
$ | ||
Total expenses | $ |
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