Intangibles: Balance Sheet Presentation and Income Statement Effects

Clinton Company has provided information on intangible assets as follows:

A patent was purchased from Lou Company for $1,425,000 on January 1, 2018. Clinton 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 $1,175,000 when Lou sold it to Clinton.

During 2019, a franchise was purchased from Rink Company for $600,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,400,000. Clinton estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase.

Clinton incurred R&D costs in 2019 as follows:

Materials and equipment	$122,000
Personnel	141,000
Indirect costs	64,000
	$327,000

Clinton estimates that these costs will be recouped by December 31, 2020.

On January 1, 2019, Clinton 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:

Question Content Area

1. Prepare a schedule showing the intangibles section of Clinton's balance sheet at December 31, 2019.

Clinton Company Intangible Assets Section of Balance Sheet December 31, 2019

Patent, net (Schedule 1)	$fill in the blank 0951ca089054ff3_1
Franchise from Rink Company, net (Schedule 2)	fill in the blank 0951ca089054ff3_2
Intangible assets	$fill in the blank 0951ca089054ff3_3
Schedule 1: Computation of Patent from Lou Company
Cost of patent at date of purchase	$fill in the blank 0951ca089054ff3_4
Amortization of patent for 2018	fill in the blank 0951ca089054ff3_5
	$fill in the blank 0951ca089054ff3_6
Amortization of patent for 2019	fill in the blank 0951ca089054ff3_7
Patent balance	$fill in the blank 0951ca089054ff3_8
Schedule 2: Computation of Franchise from Rink Company
Cost of franchise at date of purchase	$fill in the blank 0951ca089054ff3_9
Amortization of franchise for 2019	fill in the blank 0951ca089054ff3_10
Franchise balance	$fill in the blank 0951ca089054ff3_11

Question Content Area

2. Prepare a schedule showing the income statement effects for the year ended December 31, 2019, as a result of the previously mentioned facts.

Clinton Company Income Statement Effects For the Year Ended December 31, 2019

Patent from Lou Company:

		$- Select -
Franchise from Rink Company:

	$- Select -

	- Select -	- Select -

		- Select -
Total expenses		$fill in the blank 83c8cefaffc1fe9_10