Chapter 10, Problem 10.7AP

(a)

To determine

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

Research and Development Cost: Research and development cost refers to that cost which is incurred by an organization in the process of developing a new product.

Franchises: It refers to the contract which provides the right to franchisee under which he can sell specific products and render various services by utilization of trademarks granted by franchisor.

Amortization: Amortization refers to the amount of depreciation expense charged on an intangible asset. Amortization results in the decreased value of an intangible asset.

Intangible Assets: Intangible assets refer to those assets owned by the organization which do not have a physical appearance but are used to generate a value for the business.

Balance sheet: The balance sheet of a Company is the one of the most important financial statements because it shows the financial position of the Company.

Main components of balance sheet are assets, liabilities and stockholder’s equity are as expressed as in the following equation:

$\text{Assets }=\text{ Liabilities}+\text{Stockholders' equity}$

To Prepare: The journal entry for given transactions.

(b)

To determine

To Prepare: The journal entry for amortization

(c)

To determine

To Prepare: The intangible assets section in the balance sheet of S Company.