Intangibles: Balance Sheet Presentation and Income Statement Effects

Han Company has provided information on intangible assets as follows:

A patent was purchased from Lou Company for $$1,320,000$ on January $1,2018.$ Han 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 $$1,100,000$ when Lou sold it to Han.

During $2019,$ a franchise was purchased from Rink Company for $$560,000.$ In addition, $5\%$ of revenue from the franchise must be paid to Rink. Revenue from the franchise for

$2019$ was $$1,600,000.$ Han estimates the useful life of the franchise to be $5$ years and takes a full year's amortization in the year of purchase.

Han incurred R&D costs in $2019$ as follows:

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

On January $1,2019,$ Han 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:

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

Han 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

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

Han Company

Income Statement Effects

For the Year Ended December $31,2019$

Patent from Lou Company:

Amortization $of$ patent for $2019(Schedule1)$

Franchise from Rink Company:

Amortization $of$ franchise for $2019(Schedule2)vv$ :

Payment $to$ Rink $$

Research and Development Costs $$

Total expenses