The intangible assets section of Glover Ltd. at December 31, 2016, is presented below.
Patents (£60,000 cost less £6,000 amortization)...................£54,000
Franchises (£48,000 cost less £19,200 amortization)...............28,800
Total.....................................................................£82,800
The patent was acquired in January 2016 and has a useful life of 10 years. The franchise was acquired in January 2013 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2017.
Jan. 2 Paid £45,000 legal costs to successfully defend the patent against infringement by another company.
Jan.-June Developed a new product, incurring £100,000 in research costs and £68,000 in development costs prior to technological feasibility. A patent was granted for the product on July 1. Its useful life is equal to its 20-year legal life.
Sept. 1 Paid £58,000 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October.
Oct. 1 Acquired a franchise for £100,000. The franchise has a useful life of 40 years.
Instructions
(a) Prepare journal entries to record the transactions above.
(b) Prepare journal entries to record the 2017 amortization expense.
(c) Prepare the intangible assets section of the statement of financial position at December 31, 2017.