Intangibles: Balance Sheet Presentation and Income Statement Effects

Sempton Company has provided information on intangible assets as follows:

1. A patent was purchased from Lou Company for $1,230,000 on January 1, 2018. Sempton 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 $980,000 when Lou sold it to Sempton.
2. During 2019, a franchise was purchased from Rink Company for $390,000. In addition, 6% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $1,900,000. Sempton estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.
3. Sempton incurred R&D costs in 2019 as follows:

   Materials and equipment	$100,000
   Personnel	136,000
   Indirect costs	76,000
   	$312,000

   Sempton estimates that these costs will be recouped by December 31, 2020.
4. On January 1, 2019, Sempton 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 Sempton's balance sheet at December 31, 2019.

Sempton 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.

Sempton Company
Income Statement Effects
For the Year Ended December 31, 2019
Patent from Lou Company:
		$
Franchise from Rink Company:
	$
Total expenses		$