The intangible assets section of the balance sheet for Venable Company at December 31, 2014, is presented here.
Patents ($70,000 cost less $7,000 amortization)...........$63,000
Copyrights ($48,000 cost less $18,000 amortization)...........30,000
Total............................$93,000
The patent was acquired in January 2014 and has a useful life of 10 years. The copyright was acquired in January 2012 and also has a useful life of 8 years. The following cash transactions may have affected intangible assets during 2015.
Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company.
Jan.–June Developed a new product, incurring $220,000 in research and development costs. A patent was granted for the product on July 1, and its useful life is equal to its legal life. Legal and other costs for the patent were $22,000.
Sept. 1 Paid $110,000 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 copyright for $120,000. The copyright has a useful life and legal life of 50 years.
Instructions
(a) Prepare journal entries to record the transactions.
(b) Prepare journal entries to record the 2015 amortization expense.
(c) Prepare the intangible assets section of the balance sheet at December 31, 2015.
(d) Prepare the note to the financial statements on Venable Company’s intangible assets as of December 31, 2015.