Answered: prepare journal entries

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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Question

Entity A is a listed company that owns and operates a number of Japanese restaurants in Hong Kong.

Some of the restaurants are operated under a franchise agreement from another company, Entity B.

Several payments were incurred during the year 2020:

On 20 May 2020, Entity A purchased a new software system which is mainly for inventory control and management. The cost of the software is $550,000. The payment was settled on 20 June 2020. The software is expected to use for 10 years.

On 30 June 2020, Entity A paid a franchise fee of $ 150,000 to Entity B for the use of a trading name for the new restaurant which is located at Hunghom.

On 15 October 2020, Entity A paid a training cost of $45,000 for staff at the new Hunghom restaurant.

On 21 November 2020, Entity A paid an advertising cost of $165,000 for the opening of the new Hunghom restaurant.

On 13 December 2020, Entity A acquired a patent right from Entity C for $350,000 under a 20-year contract.

REQUIRED:

According to relevant accounting standards, prepare journal entries to record the transactions of Entity A on 20 May 2020, 30 June 2020, 15 October 2020, 21 November 2020 and 13 December 2020 respectively.

ACCOUNTS FOR INPUT:

| Intangible asset-Software | Intangible asset-Franchise | Intangible asset-Training |

| Intangible asset-Advertisement | Intangible asset-Patent right |

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