College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Chapter 18, Problem 13SPB
1.
To determine
Compute the amortization expense of patent, copy right, and franchise for the year.
2.
To determine
Journalize the amortization expense transactions related to intangible assets.
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Intangible Long-Term Assets
Track Town Co. had the following transactions involving intangible assets:
Purchased a patent for leather soles for $10,000 and estimated its useful life to be
Jan. 1
10 years.
Purchased a copyright for a design for $15,000 with a life left on the copyright of
Apr. 1
25 years. The estimated remaining (economic) life of the copyright is five years.
Signed a five-year franchise agreement and opened a Starting Line high-tech
July 1
running shoe store. Paid $50,000 to the franchisor.
Required:
1. Using the straight-line method, calculate the amortization of the patent, copyright,
and Franchise.
a. Patent
10,000 x
b. Copyright $
c. Franchise
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2. Prepare general journal entries to record the end-of-year amortizations.
Page: 1
DOC. POST.
NO. REF.
DATE
ACCOUNT TITLE
DEBIT CREDIT
20--
Dec. 31
2
2
3
3
4 Dec. 31
4
6
6
7 Dec. 31
7
Kleen Company acquired patent rights on January 10 of Year 1 for $416,000. The patent has a useful life equal to its legal life of 8 years. On January
7 of Year 4, Kleen successfully defended the patent in a lawsuit at a cost of $21,000.
a. Determine the patent amortization expense for the Year 4 ended December 31.
52,000 X
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For intangible assets with finite lives, a company uses the straight-line method to calculate amortization. If a company successfully defends
a patent it becomes part of the cost of the patent. If the company loses a lawsuit regarding a patent infringement, then the patent is written
off.
b. Journalize the adjusting entry on December 31 of Year 4 to recognize the amortization. If an amount box does not require an entry, leave it i
blank.
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$2,000 X
$2,000 X
Computing Subsequent Carrying Amount of Patents
In January of Year 1, Ford Co. purchased a patent from a research institution for $250,000. The patent was estimated to have a useful life of 15 years. In December of Year 2, Ford Co.
unsuccessfully defended the patent in legal proceedings. The fair value of the patent on December 31 of Year 2, is now estimated to be $50,000 with a 2-year useful life.
a. Record the entry for the legal fees of $20,000, paid in cash.
b. Record any adjusting entry required on December 31 of Year 2.
c. Determine the carrying value of the patent on December 31 of Year 2.
• Note: Round your final answers to the nearest dollar.
Date
a. Dec. 31, Year 2
b. Dec. 31, Year 2
C.
Account Name
To record legal fees.
To record adjusting entry.
Patent net carrying value, Dec. 31, Year 2 $ 0
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Chapter 18 Solutions
College Accounting, Chapters 1-27
Ch. 18 - Prob. 1TFCh. 18 - Prob. 2TFCh. 18 - Depreciation is a process of asset valuation; that...Ch. 18 - The straight-line method of depreciation allocates...Ch. 18 - Prob. 5TFCh. 18 - Prob. 1MCCh. 18 - Prob. 2MCCh. 18 - Prob. 3MCCh. 18 - Prob. 4MCCh. 18 - Prob. 5MC
Ch. 18 - The following costs were incurred to purchase a...Ch. 18 - Prob. 2CECh. 18 - A machine costing 350,000 has a salvage value of...Ch. 18 - Grandorf Company replaced the engine in a truck...Ch. 18 - Prepare journal entries for the following...Ch. 18 - Prob. 6CECh. 18 - Prob. 7CECh. 18 - Prob. 1RQCh. 18 - Prob. 2RQCh. 18 - Prob. 3RQCh. 18 - What is meant by the depreciable cost of a plant...Ch. 18 - Prob. 5RQCh. 18 - Prob. 6RQCh. 18 - Prob. 7RQCh. 18 - For assets acquired after 1986, but before...Ch. 18 - Prob. 9RQCh. 18 - Prob. 10RQCh. 18 - Prob. 11RQCh. 18 - Prob. 12RQCh. 18 - Prob. 13RQCh. 18 - Prob. 14RQCh. 18 - Prob. 15RQCh. 18 - Prob. 16RQCh. 18 - Prob. 17RQCh. 18 - Prob. 18RQCh. 18 - Prob. 19RQCh. 18 - Prob. 20RQCh. 18 - Prob. 21RQCh. 18 - Prob. 22RQCh. 18 - Prob. 23RQCh. 18 - Prob. 1SEACh. 18 - STRAIGHT-LINE, DECLINING-BALANCE, AND...Ch. 18 - UNITS-OF-PRODUCTION METHOD The truck purchased in...Ch. 18 - Prob. 4SEACh. 18 - JOURNAL ENTRIES: DISPOSITION OF PLANT ASSETS...Ch. 18 - Prob. 6SEACh. 18 - STRAIGHT-LINE, DECLINING-BALANCE,...Ch. 18 - UNITS-OF-PRODUCTION METHOD A machine is purchased...Ch. 18 - CALCULATING AND JOURNALIZING DEPRECIATION...Ch. 18 - IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE...Ch. 18 - DISPOSITION OF ASSETS: JOURNALIZING Mitchell Parts...Ch. 18 - DEPLETION: CALCULATING AND JOURNALIZING Mineral...Ch. 18 - INTANGIBLE LONG-TERM ASSETS Track Town Co. had the...Ch. 18 - Prob. 1SEBCh. 18 - STRAIGHT-LINE, DECLINING-BALANCE, AND...Ch. 18 - Prob. 3SEBCh. 18 - Prob. 4SEBCh. 18 - JOURNAL ENTRIES: DISPOSITION OF PLANT ASSETS...Ch. 18 - Prob. 6SEBCh. 18 - STRAIGHT-LINE, DECLINING-BALANCE,...Ch. 18 - UNITS-OF-PRODUCTION METHOD A machine is purchased...Ch. 18 - CALCULATING AND JOURNALIZING DEPRECIATION...Ch. 18 - IMPACT OF IMPROVEMENTS AND REPLACEMENTS ON THE...Ch. 18 - DISPOSITION OF ASSETS: JOURNALIZING Mayer Delivery...Ch. 18 - DEPLETION: CALCULATING AND JOURNALIZING Mining...Ch. 18 - Prob. 13SPBCh. 18 - Prob. 1MYWCh. 18 - Creative Solutions purchased a patent from Russell...Ch. 18 - On April 1, 20-3, Kwik Kopy Printing purchased a...Ch. 18 - Prob. 1CP
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- INTANGIBLE LONG-TERM ASSETS Track Town Co. had the following transactions involving intangible assets: Jan. 1 Purchased a patent for leather soles for 10,000 and estimated its useful life to be 10 years. Apr. 1 Purchased a copyright for a design for 15,000 with a life left on the copyright of 25 years. The estimated remaining (economic) life of the copyright is five years. July 1 Signed a five-year franchise agreement and opened a Starting Line high-tech running shoe store. Paid 50,000 to the franchisor. REQUIRED 1. Using the straight-line method, calculate the amortization of the patent, copyright, and franchise. 2. Prepare general journal entries to record the end-of-year amortizations.arrow_forwardThe following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining legal life of twelve years is bought, and Hanna expects to be able to use it for six years. It is purchased at a cost of $48,000. B. A copyright with a remaining life of thirty years is purchased, and Hanna expects to be able to use it for ten years. It is purchased for $70,000. Determine the annual amortization amount for each intangible asset.arrow_forwardThe following intangible assets were purchased by Goldstein Corporation: A. A patent with a remaining legal life of twelve years is bought, and Goldstein expects to be able to use it for seven years. B. A copyright with a remaining life of thirty years is purchased, and Goldstein expects to be able to use it for ten years. For each of these situations, determine the useful life over which Goldstein will amortize the intangible assets.arrow_forward
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