The following information relates to the intangible assets of Lettuce Express:
a. On January 1, 2012, Lettuce Express completed the purchase of Farmers Produce, Inc., for $1,500,000 in cash. The fair value of the identifiable net assets of Farmers Produce was $1,350,000.
b. Included in the assets purchased from Farmers Produce was a patent for a method of processing lettuce valued at $45,000. The original legal life of the patent was 20 years. There are still 17 years left on the patent, but Lettuce Express estimates the patent will be useful for only 10 more years.
c. Lettuce Express acquired a franchise on July 1, 2012, by paying an initial franchise fee of $175,000. The contractual life of the franchise is seven years.
Required:
1. Record amortization expense for the intangible assets at December 31, 2012.
2. Prepare the intangible asset section of the December 31, 2012, balance sheet.