Question
Wildhorse Company has provided information on intangible assets as follows. A patent was purchased from Windsor Company for $1,700,000 on January 1, 2019. Wildhorse estimated
Wildhorse Company has provided information on intangible assets as follows.
A patent was purchased from Windsor Company for $1,700,000 on January 1, 2019. Wildhorse estimated the remaining useful life of the patent to be 10 years. The patent was carried in Windsor's accounting records at a net book value of $1,700,000 when Windsor sold it to Wildhorse.
During 2020, a franchise was purchased from Novak Company for $460,000. In addition, 5% of revenue from the franchise must be paid to Novak. Revenue from the franchise for 2020 was $2,530,000. Wildhorse estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.
Wildhorse incurred research and development costs in 2020 as follows.
Materials and equipment $153,000
Personnel 204,000
Indirect costs 108,000
$465,000
Wildhorse estimates that these costs will be recouped by December 31, 2023. The materials and equipment purchased have no alternative uses.
On January 1, 2020, because of recent events in the field, Wildhorse estimates that the remaining life of the patent purchased on January 1, 2019, is only 5 years from January 1, 2020.
Collapse question part
(a)
Prepare the intangibles section of Wildhorse's balance sheet at December 31, 2020. (Enter account name only and do not provide descriptive information.)
WILDHORSE COMPANY
Intangibles Section of Balance Sheet
December 31, 2020
Intangible Assets
Patents
$1,224,000
Franchises
414,000
Total Intangible Assets
$1,638,000
Collapse question part
(b)
Prepare the income statement effect (related to expenses) for the year ended December 31, 2020, as a result of the facts above. (Enter account name only and do not provide descriptive information.)
WILDHORSE COMPANY
Income Statement Effect
choose the accounting period
select an opening name for section one
:
select an item
$enter a dollar amount
select an opening name for section two
:
select an item
$enter a dollar amount
select an item
enter a dollar amount
enter a subtotal of the two previous amounts
select an item
enter a dollar amount
select a closing name
$enter a total amount
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started