Problem 12-03 (Part Level Submission) Information concerning Sheffield Corporation's intangible assets is as follows. 1. On January 1, 2020, Sheffield signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000. Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $20,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 10% (the implicit rate for a loan of this type) is $63,400. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Sheffield's revenue from the franchise for 2020 was $860,000. Sheffield estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Sheffield incurred $70,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2020. Legal fees and other costs associated with registration of the patent totaled $19,000. Sheffield estimates that the useful life of the patent will be 8 years. 3. A trademark was purchased from Shanghai Company for $36,000 on July 1, 2017. Expenditures for successful litigation in defense of the trademark totaling $11,900 were paid on July 1, 2020. Sheffield estimates that the useful life of the trademark will be 20 years from the date of acquisition. (a) Your answer is correct. Prepare a schedule showing the intangible assets section of Sheffield's balance sheet at December 31, 2020. SHEFFIELD CORPORATION Intangible Assets December 31, 2020 Franchise 75,060 Patent 16,625 Trademark 41,250 Total Intangible Assets 132,935 (b) Your answer is partially correct. Try again. Prepare a schedule showing all expenses resulting from the transactions that would appear on Sheffield's income statement for the year ended December 31, 2020. SHEFFIELD CORPORATION Expenses Resulting from Selected Intangible Assets Transactions For the Year Ended December 31, 2020 Interest Expense 6,340 Franchise Amortization 8,340 Franchise Fee 43,000 Patent Amortization 2,375 Trademark Amortization 2,150 Total Intangible Assets 62,205