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/ journal entry to record expenditures related to initial acquisitions.

/ journal entry to record expenditures related to initial acquisitions.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I don't know how to record it in a journal entry especially involved the initial payment and monthly payment, here are a few items I know:

Patent 20,900

legal filling 14,500

Franchises 290,000

Equipment 409,000

Copyright 28,000

 

In 2021, Bratten Fitness Company made the following cash purchases: 1. The exclusive right to manufacture and sell the X-Core workout equipment from Symmetry Corporation for $209,000. Symmetry created the unique design for the equipment. Bratten also paid an additional $14,500 in legal and filing fees to attorneys to complete the transaction. 2. An initial fee of $290,000 for a three-year agreement with Silver's Gym to use its name for a new facility in the local area. Silver's Gym has locations throughout the country. Bratten is required to pay an additional fee of $5,900 for each month it operates under the Silver's Gym name, with payments beginning in March 2021. Bratten also purchased $409,000 of exercise equipment to be placed in the new facility. 3. The exclusive right to sell Healthy Choice, a book authored by Kent Patterson, for $28,000. The book includes healthy recipes, recommendations for dietary supplements, and natural remedies. Bratten plans to display the book at the check-in counter at its new facility, as well as make it available online. Required: Prepare a summary journal entry to record expenditures related to initial acquisitions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit 1 1 Patent 209,000
Transcribed Image Text:In 2021, Bratten Fitness Company made the following cash purchases: 1. The exclusive right to manufacture and sell the X-Core workout equipment from Symmetry Corporation for $209,000. Symmetry created the unique design for the equipment. Bratten also paid an additional $14,500 in legal and filing fees to attorneys to complete the transaction. 2. An initial fee of $290,000 for a three-year agreement with Silver's Gym to use its name for a new facility in the local area. Silver's Gym has locations throughout the country. Bratten is required to pay an additional fee of $5,900 for each month it operates under the Silver's Gym name, with payments beginning in March 2021. Bratten also purchased $409,000 of exercise equipment to be placed in the new facility. 3. The exclusive right to sell Healthy Choice, a book authored by Kent Patterson, for $28,000. The book includes healthy recipes, recommendations for dietary supplements, and natural remedies. Bratten plans to display the book at the check-in counter at its new facility, as well as make it available online. Required: Prepare a summary journal entry to record expenditures related to initial acquisitions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Transaction General Journal Debit Credit 1 1 Patent 209,000
Expert Solution
Step 1 Patent Acquired from Symmetry corporation

Here exclusive right acquired is in the form of an intangible asset 

An intangible asset is an identifiable asset that doesn't have physical substance. 

Now , Journal Entry for acquiring right is

 

Patent A/C                            Dr       209,000

Legal Fee and filing fee A/C Dr        14,500

           To Cash A/C                                          2,23,500

( Being Patent Acquired from Symmetry Corporation capitalized and recorded in books of accounts)

 

Note - Legal and filing fee can be amortized over the useful life of the Patent 

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