Information concerning Blue Corporation's intangible assets is as follows. On January 1, 2025, Blue signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000. Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $20,000 each, beginning January 1, 2026. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2025, of the 4 annual payments discounted at 15% (the implicit rate for a loan of this type) is $57,100. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Blue's revenue from the franchise for 2025 was $870,000. Blue estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) Blue incurred $65,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2025. Legal fees and other costs associated with registration of the patent totaled $17,400. Blue estimates that the useful life of the patent will be 8 years. A trademark was purchased from Shanghai Company for $48,000 on July 1, 2022. Expenditures for successful litigation in defense of the trademark totaling $8,500 were paid on July 1, 2025. Blue estimates that the useful life of the trademark will be 20 years from the date of acquisition. Your answer is partially correct. Prepare a schedule showing the intangible assets section of Blue's balance sheet at December 31, 2025. - Your answer is partially correct. Franchise Prepare a schedule showing the intangible assets section of Blue's balance sheet at December 31, 2025. Patent Trademark BLUE CORPORATION Intangible Assets December 31, 2025 Total Intangible Assets 1 C 72,675
Information concerning Blue Corporation's intangible assets is as follows. On January 1, 2025, Blue signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000. Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $20,000 each, beginning January 1, 2026. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2025, of the 4 annual payments discounted at 15% (the implicit rate for a loan of this type) is $57,100. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Blue's revenue from the franchise for 2025 was $870,000. Blue estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) Blue incurred $65,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2025. Legal fees and other costs associated with registration of the patent totaled $17,400. Blue estimates that the useful life of the patent will be 8 years. A trademark was purchased from Shanghai Company for $48,000 on July 1, 2022. Expenditures for successful litigation in defense of the trademark totaling $8,500 were paid on July 1, 2025. Blue estimates that the useful life of the trademark will be 20 years from the date of acquisition. Your answer is partially correct. Prepare a schedule showing the intangible assets section of Blue's balance sheet at December 31, 2025. - Your answer is partially correct. Franchise Prepare a schedule showing the intangible assets section of Blue's balance sheet at December 31, 2025. Patent Trademark BLUE CORPORATION Intangible Assets December 31, 2025 Total Intangible Assets 1 C 72,675
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Information concerning Blue Corporation's intangible assets is as follows. On January 1, 2025, Blue signed
an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000.
Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual
payments of $20,000 each, beginning January 1, 2026. The agreement provides that the down payment is
not refundable and no future services are required f the franchisor. The present value at January 1, 2025,
of the 4 annual payments discounted at 15% (the implicit rate for a loan of this type) is $57,100. The
agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually.
Blue's revenue from the franchise for 2025 was $870,000. Blue estimates the useful life of the franchise to
be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for
the franchise fee and payments.) Blue incurred $65,000 of experimental and development costs in its
laboratory to develop a patent that was granted on January 2, 2025. Legal fees and other costs associated
with registration of the patent totaled $17,400. Blue estimates that the useful life of the patent will be 8
years. A trademark was purchased from Shanghai Company for $48,000 on July 1, 2022. Expenditures for
successful litigation in defense of the trademark totaling $8,500 were paid on July 1, 2025. Blue estimates
that the useful life of the trademark will be 20 years from the date of acquisition. Your answer is partially
correct. Prepare a schedule showing the intangible assets section of Blue's balance sheet at December
31, 2025.
Your answer is partially correct.
Prepare a schedule showing the intangible assets section of Blue's balance sheet at December 31, 2025.
Franchise
Patent
Trademark
BLUE CORPORATION
Intangible Assets
December 31, 2025
Total Intangible Assets
O
72,675
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