Question

Intangibles: Balance Sheet Presentation and Income Statement Effects Binson Company has provided Information on intangible assets as follows: 1. A patent was purchased from Lou Company for $1,215,000 on January 1, 2018. Binson estimated the remaining useful life of the patent to be 10 years. The patent was cariedin Lou's accounting records at a net book value of $905,000 when Lou sold it to Binson. 2. During 2019, a franchise was purchased from Rink Company for $420,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $2,300,000. Binson estimates the useful life of the franchise to be 5 years and takes a full year's amortization in the year of purchase. 3. Binson incurred R&D costs in 2019 as follows: Materials and equipment $122,000 Personnel 163,000 57,000 Indirect costs $342,000 Binson estimates that these costs wil be recouped by December 31, 2020. 4. On January 1, 2019, Binson estimates, based on new events, that the remaining life of the patent purchased on January 1, 2018, is only 5 years from January 1, 2019. Required: 1. Prepare a schedule showing the intangibles section of Binson's balance sheet at December 31, 2019. Binson Company Intangible Assets Section of Balance Sheet December 31, 2019 Patent, net (Schedule 1) 1,215,000 X Franchise from Rink Company, net (Schedule 2) Intangibie assets Schedule 1: Computation of Patent from Lou Company Cost of patent at date of purchase Amortization of patent for 201S Check My Work Previous Next

Answer 1

Working as follows: Patents: Amortization in year 2018 = Year _$1,215,000 10 = $121,500 Book value at beginning of 2019 = $1,215,000 - $121,500 = $1,093,500 Amortization in year 2019 = Cost Year $1,093,500 = $218,700 Book value at End of 2019 = $1,093,500 - $218,700 = $874,800

Franchise: Amortization in year 2019 = Cost Year $420,000 10 = $42.000 Book value at 2019 = $420,000 - $42,000 = $378,000 Binson Company Intangible section of Balance sheet December 31, 2019 Patents, net $874.800 Franchise $378,000 Intangible Assets $1.252.800