Taylor Lewis Company has provided information on intangible assets as follows:

a. During 2015, a patent was purchased from Craig Company for $4,000,000 on June 1, 2015.Lewis estimated the remaining useful life of the patent to be eight years.The patent was carried in Craig's accounting records at a net book value of $3,500,000 when Craig sold it to Lewis.

On January 1, 2016, because of recent events in the field, Lewis estimates that the remaining life of the patent purchased on June 1, 2015, is only five years from January 1, 2016.

b. During 2016, a franchise was purchased from Faragher Company for $360,000.Lewis estimates the useful life of the franchise to be 12 years and takes a full year's amortization in the year of purchase.

In addition, 8% of revenue from the franchise must be paid to Faragher each year.Revenue from the franchise for 2016 was $1,950,000.

c. Lewis incurred research and development costs in 2016 as follows:

Materials and equipment

$286,500

Personnel

$153,700

Indirect costs

$95,355

Total

$535,555

Lewis estimates that these costs will be recouped by December 31, 2019. The materials and equipment purchases have no alternative uses.

Required:

1. a partial balance sheet showing the intangible section only of Lewis's balance sheet as of December 31, 2016.Show supporting computations in good form.

2. a partial income statement showing the income statement effect for the year ended December 31, 2016, as a result of the facts above.Show supporting computations in good form.