Question

The intangible assets section of Oriole Company at December 31, 2019, is presented below.

Patents ($62,000 cost less $6,200 amortization)		$55,800
Franchises ($43,000 cost less $17,200 amortization)		25,800
Total		$81,600

The patent was acquired in January 2019 and has a useful life of 10 years. The franchise was acquired in January 2016 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2020.

Jan. 2		Paid $18,000 legal costs to successfully defend the patent against infringement by another company.
Jan.–June		Developed a new product, incurring $146,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.
Sept. 1		Paid $47,000 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October.
Oct. 1		Acquired a franchise for $124,000. The franchise has a useful life of 50 years. Prepare journal entries to record the transactions above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 2Jan.–JuneSept. 1Oct. 1 Jan. 2Jan.–JuneSept. 1Oct. 1 Jan. 2Jan.–JuneSept. 1Oct. 1 Jan. 2Jan.–JuneSept. 1Oct. 1

Prepare journal entries to record the 2020 amortization expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 2,125.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 2Jan.–JuneSept. 1Oct. 1Dec. 31
	(To record patents amortization)
Jan. 2Jan.–JuneSept. 1Oct. 1Dec. 31
	(To record franchise amortization)

Prepare the intangible assets section of the balance sheet at December 31, 2020. (Round answers to 0 decimal places, e.g. 2,125.)

Oriole Company Balance Sheet (Partial) For the Month Ended December 31, 2020December 31, 2020For the Year Ended December 31, 2020
Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity
			$
Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity			$

Answer 1

Solution:

1.) Journal entries:

No.	Date	Account title and Explanation	Debit	Credit
1.	Jan.2	Patent	$18,000
		Cash		$18,000
		(To record the legal cost of patent)
2.	July 1	Patent	$146,000
		Cash		$146,000
		(To record a patent was granted on July 1)
3.	Sept.1	Advertising expenses	$47,000
		Cash		$47,000
		(To record commercial and advertising)
4.	Oct.1	Franchise	$124,000
		Cash		$124,000
		(To record acquired a franchise)

2.

Journal entries

No.	Date	Account title and Explanation	Debit	Credit
1.	Dec.31	Amoritization expenses - Patents	$82,00
		Patents [($62,000 ×1/10)+($18,000 ×1/9)]($6,200+$2,000)		$8,200
		(To record amoritization expenses of patent)
2.)	Dec.31	Amoritization expenses - franchise	$4,920
		Franchise [($43,000 × 1/10)+($124,000 × 1/50 ×3/12)]($4300+$620)		$4,920
		(To record amoritization expenses franchise)

3.) Intangible assets:

Patents ($80,000 cost - $14,400 amoritization)	$65,600
Franchise ($167,000 cost - $22,120	$144,880
Total intangible assets	$210,480

* 1) Cost ($62,000+$18,000); amoritization ($6,200+8,200)

* 2) Cost ($43,000+$124,000) ;amoritization ($17,200+$4,920)