Clinton Company has provided information on Intangible assets as folows: 1. A patent was purchased from Lou Company for $1,230,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of $850,000 when Lou sold it to Clinton. 2. During 2019, a franchise was purchased from Rink Company for $550,000. In addition, 6% of revenue from the franchise must be pald to Rink. Revenue from the franchise for 2019 was $2,500,000. Clinton estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase. 3. Clinton incurred RAD costs in 2019 as follows: Materials and equipment $147,000 Personnel 178,000 Indirect costs 69,000 $394,000 Clinton estimates that these costs will be recouped by December 31, 2020. 4. On January 1, 2019, Clinton estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 10 years from Januaryt, 2019. Required: 1. Prepare a schedule showing the intangibles section of Clinton's balance sheet at December 31, 2019. Clinton Company Intangible Assets Section of Balance Sheet December 31, 2019 Patent, net (Schedule 1) Franchise from Rink Company, net (Schedule 2) Intangible essets Schedule 1 Computation of Patent from Lou Compan
Clinton Company has provided information on Intangible assets as folows: 1. A patent was purchased from Lou Company for $1,230,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of $850,000 when Lou sold it to Clinton. 2. During 2019, a franchise was purchased from Rink Company for $550,000. In addition, 6% of revenue from the franchise must be pald to Rink. Revenue from the franchise for 2019 was $2,500,000. Clinton estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase. 3. Clinton incurred RAD costs in 2019 as follows: Materials and equipment $147,000 Personnel 178,000 Indirect costs 69,000 $394,000 Clinton estimates that these costs will be recouped by December 31, 2020. 4. On January 1, 2019, Clinton estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 10 years from Januaryt, 2019. Required: 1. Prepare a schedule showing the intangibles section of Clinton's balance sheet at December 31, 2019. Clinton Company Intangible Assets Section of Balance Sheet December 31, 2019 Patent, net (Schedule 1) Franchise from Rink Company, net (Schedule 2) Intangible essets Schedule 1 Computation of Patent from Lou Compan
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Intangibles: Balance Sheet Presentation and Income Statement Effects
Clinton Company has provided information on Intangible assets as follows:
1. A patent was purchased from Lou Company for $1,230,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 15 years. The patent
was carried in Lou's accounting records at a net book value of 5850,000 when Lou sold it to Clinton.
2. During 2019, a franchise was purchased from Rink Company for $550,000, In addition, 6% of revenue from the franchise must be pald to Rink. Revenue from the
franchise for 2019 was $2,500,000. Clinton estimates the useful life of the franchise to be 5 years and takes a full vear's amortization in the year of purchase.
3. Clinton incurred RAD costs in 2019 as follows:
Materials and equipment
$147,000
Personnel
178,000
Indirect costs
69,000
$394,000
Clinton estimates that these costs will be recouped by December 31, 2020.
4. On January 1, 2019, Clinton estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 10 years from January 1,
2019.
Required:
1. Prepare a schedule showing the intangibles section of Clinton's balance sheet at December 31, 2019.
Clinton Company
Intangible Assets Section of Balance Sheet
December 31, 2019
Patent, net (Schedule 1)
Franchise from Rink Company, net (Schedule 2)
Intangible essets
Schedule 1 Computation of Patent from Lou Company
Transcribed Image Text:Clinton Company
Intangible Assets Section of Balance Sheet
December 31, 2019
Patent, net (Schedule 1)
Franchise from Rink Company, net (Schedule 2)
Intangible assets
Schedule 1: Computation of Patent from Lou Company
Cost of patent at date of purchase
Amortization of patent for 2018
Amortization of patent for 2019
Patent balance
Schedule 2: Computation of Franchise from Rink Company
Cost of franchise at date of purchase
Amortization of franchise for 2019
Franchise balance
%24
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