Trademarks were previously acquired for $200,000 on January 1, 2018. Estimated useful life at the time of acquisition was 20 years. In 2019, there was litigation challenging these trademarks brought by a competitor, and GeneralProducts successfully defended these trademarks at a legal cost of $45,000. The new (updated) useful life of the trademarks was estimated to be 25 years from the date of acquisition.All sales were on credit and totaled $940,560. COGS totaled $780,650.Included in the total sales of $940,560 were the sales of 6,000 soap powder boxes. As a premium offer to increase soap powder sales, GeneralProducts includes one special coupon with every soap powder box. Customers can redeem four coupons to obtain one free premium item—a kitchen utensil. Based on past experience, 60% of the coupons are expected to be redeemed by customers. During 2019, 3,400 coupons were actually redeemed. Also in 2019, GeneralProducts purchased an additional 1,000 premiums (kitchen utensil items) @ $1.10 each on credit to add to its Inventory of Premiums.Five-year 6% bonds were issued on January 1, 2018, sold to yield 8% interest. Interest is paid semiannually on January 1 and June 30 for these bonds. Maturity value of the bond issue is $100,000 and the issue was sold at a discount of $8,111 for an initial carrying value of $91,889. The bond indenture indicated that GeneralProducts may later call and redeem these bonds @101 any time after June 30, 2019. These bonds were subsequently called and redeemed on September 1, 2019, following the sale of a new 5% bond issue taking advantage of lower interest rates (see Item 5 below). The effective-interest method is applied to amortize the discount.To take advantage of lower interest rates and to finance the call and redemption of the previously issued 6% bonds @ 101, on September 1, 2019, GeneralProducts issued new 5% bonds with face value of $100,000 to yield 6%. The maturity period of these new 5% bonds is 10 years and interest is paid semiannually on January 1 and June 30. The new 5% bonds were issued at a discount of $7,438 for an initial carrying value of $$92,562 on July 1, 2019. The effective-interest method is applied to amortize the discount.Selling and administrative expenses excluding noncash items totaled $87,345. PP&E is depreciated using the straight-line method over 25 years of life.Cash collected from customers totaled $906,450.Cash paid to suppliers for credit purchases totaled $728,254.Purchases of inventory totaled $689,525. All purchases were on credit.GeneralProducts purchased land for $30,000 in advance of construction of a building and paid in full.Record the necessary journal entries for the year 2019.

Given: General Products successfully defended these trademarks at a legal cost of $45,000. The new…

Answered: Trademarks were previously acquired for…

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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Trademarks were previously acquired for $200,000 on January 1, 2018. Estimated useful life at the time of acquisition was 20 years. In 2019, there was litigation challenging these trademarks brought by a competitor, and GeneralProducts successfully defended these trademarks at a legal cost of $45,000. The new (updated) useful life of the trademarks was estimated to be 25 years from the date of acquisition.
All sales were on credit and totaled $940,560. COGS totaled $780,650.
Included in the total sales of $940,560 were the sales of 6,000 soap powder boxes. As a premium offer to increase soap powder sales, GeneralProducts includes one special coupon with every soap powder box. Customers can redeem four coupons to obtain one free premium item—a kitchen utensil. Based on past experience, 60% of the coupons are expected to be redeemed by customers. During 2019, 3,400 coupons were actually redeemed. Also in 2019, GeneralProducts purchased an additional 1,000 premiums (kitchen utensil items) @ $1.10 each on credit to add to its Inventory of Premiums.
Five-year 6% bonds were issued on January 1, 2018, sold to yield 8% interest. Interest is paid semiannually on January 1 and June 30 for these bonds. Maturity value of the bond issue is $100,000 and the issue was sold at a discount of $8,111 for an initial carrying value of $91,889. The bond indenture indicated that GeneralProducts may later call and redeem these bonds @101 any time after June 30, 2019. These bonds were subsequently called and redeemed on September 1, 2019, following the sale of a new 5% bond issue taking advantage of lower interest rates (see Item 5 below). The effective-interest method is applied to amortize the discount.
To take advantage of lower interest rates and to finance the call and redemption of the previously issued 6% bonds @ 101, on September 1, 2019, GeneralProducts issued new 5% bonds with face value of $100,000 to yield 6%. The maturity period of these new 5% bonds is 10 years and interest is paid semiannually on January 1 and June 30. The new 5% bonds were issued at a discount of $7,438 for an initial carrying value of $$92,562 on July 1, 2019. The effective-interest method is applied to amortize the discount.
Selling and administrative expenses excluding noncash items totaled $87,345. PP&E is depreciated using the straight-line method over 25 years of life.
Cash collected from customers totaled $906,450.
Cash paid to suppliers for credit purchases totaled $728,254.
Purchases of inventory totaled $689,525. All purchases were on credit.
GeneralProducts purchased land for $30,000 in advance of construction of a building and paid in full.

Record the necessary journal entries for the year 2019.

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