Question
Janes Company provided the following information on intangible assets: A patent was purchased from the Lou Company for $1,700,000 on January 1, 2019. Janes estimated
Janes Company provided the following information on intangible assets:
- A patent was purchased from the Lou Company for $1,700,000 on January 1, 2019. Janes estimated the remaining useful life of the patent to be 10 years. The patent was carried on Lous accounting records at a net book value of $550,000 when Lou sold it to Janes.
- During 2021, a franchise was purchased from the Rink Company for $700,000. The contractual life of the franchise is 10 years and Janes records a full year of amortization in the year of purchase.
- Janes incurred research and development costs in 2021 as follows:
Materials and supplies | $ | 160,000 | |
Personnel | 200,000 | ||
Indirect costs | 80,000 | ||
Total | $ | 440,000 | |
- Effective January 1, 2021, based on new events that have occurred, Janes estimates that the remaining life of the patent purchased from Lou is only five more years.
Required: 1. Prepare the entries necessary for years 2019 through 2021 to reflect the above information. 2. Prepare a schedule showing the intangible asset section of Janess December 31, 2021, balance sheet.
Entry 1: Record the purchase of a patent.
Entry 2: Record amortization on the patent.
Entry 3: Record amortization on the patent.
Entry 4: Record the purchase of a franchise.
Entry 5: Record amortization of franchise.
Entry 6: Record research and development expenses.
Entry 7: Record amortization on the patent after change in useful life.
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