Barb Company has provided information on intangible assets as follows:1. A patent was purchased from Lou Company for $1,500,000 on January 1, 2018. Barb estimated the remaining useful life of the patent to be 10 years. The patent was carried in Lou’s accounting records at a net book value of $1,250,000 when Lou sold it to Barb.2. During 2019, a franchise was purchased from Rink Company for $500,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,000,000. Barb estimates the useful life of the franchise to be 10 years and takes a full year’samortization in the year of purchase.3. Barb incurred R&D costs in 2019 as follows. 3. Barb incurred R&D costs in 2019 as follows.Materials and equipmentPersonnelIndirect costs$120,000140,00060,000$320,000Barb estimates that these costs will be recouped by December 31, 2020.4. On January 1, 2019, Barb estimates, based on new events, that theremaining life of the patent purchased on January 1, 2018, is only 5 yearsfrom January 1, 2019.Required:1. Prepare the intangibles assets section of Barb's balance sheet atDecember 31, 2019. Show supporting computations.2. Prepare a schedule showing the income statement effects for the yearended December 31, 2019, as a result of the previously mentioned facts.Show supporting computations.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Barb Company has provided information on intangible assets as follows:
1. A patent was purchased from Lou Company for $1,500,000 on January 1, 2018. Barb estimated the remaining useful life of the patent to be 10 years. The patent was carried in Lou’s accounting records at a net book value of $1,250,000 when Lou sold it to Barb.
2. During 2019, a franchise was purchased from Rink Company for $500,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,000,000. Barb estimates the useful life of the franchise to be 10 years and takes a full year’s
amortization in the year of purchase.
3. Barb incurred R&D costs in 2019 as follows.

3. Barb incurred R&D costs in 2019 as follows.
Materials and equipment
Personnel
Indirect costs
$120,000
140,000
60,000
$320,000
Barb estimates that these costs will be recouped by December 31, 2020.
4. On January 1, 2019, Barb estimates, based on new events, that the
remaining life of the patent purchased on January 1, 2018, is only 5 years
from January 1, 2019.
Required:
1. Prepare the intangibles assets section of Barb's balance sheet at
December 31, 2019. Show supporting computations.
2. Prepare a schedule showing the income statement effects for the year
ended December 31, 2019, as a result of the previously mentioned facts.
Show supporting computations.

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