Question

2 3 P12-3 (Accounting for Franchise, Patents, and Trademark) Information concerning Sandra, Corpora- tion's intangible assets is as follows. 1. On January 1, 2015, Sandro signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of R$75,000. Of this amount, R$15,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of R$15,000 each, beginning January 1, 2016. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2015, of the 4 annual payments discounted at 14%

Answer 1

a)

SANDRO CORPORATION
Intangible Assets
December, 31,2015
Franchise,	$    52,830.00
Patent	$    15,400.00
Trademark	$    39,600.00
Total Intangible Assets	$ 107,830.00

Working Note-

Working Note-1	Franchise,
Cost of franchise on 1/1/15 ($15,000 + $43,700)	$ 58,700.00
2010 amortization ($58,700 X 1/10)	$     5,870.00
Cost of franchise, net of amortization	$ 52,830.00
Working Note-2	Patent
Cost of securing patent on 1/2/15	$ 17,600.00
2010 amortization ($17,600 X 1/8)	$     2,200.00
Cost of franchise, net of amortization	$ 15,400.00
Working Note-3	Trademark
Cost of trademark on 7/1/12	$ 36,000.00
Amortization, 7/1/12 to 7/1/15 ($36,000 X 3/20)	$     5,400.00
Book value on 7/1/15	$ 30,600.00
Cost of successful legal defense on 7/1/15	$ 10,200.00
Book value after legal defense	$ 40,800.00
Amortization, 7/1/15 to 12/31/15 ($40,800 X 1/17 X 6/12)	$     1,200.00
Cost of trademark, net of amortization	$ 39,600.00

b)

Sandro Corporation
Schedule of expenses
For the Year Ended December 31, 2015
Interest expense ($43,700 X 14%)	$    6,118.00
Franchise amortization (Working Note-1)	$    5,870.00
Franchise fee ($900,000 X 5%)	$ 45,000.00
Patent amortization (Working Note-2)	$    2,200.00
Amortization, 1/1/15 to 6/30/15 ($36,000 X 1/20 X 6/12)	$        900.00
Amortization, 7/1/15 to 12/31/15 ($40,800 X 1/17 X 6/12)]	$    1,200.00
Total Expenses	$ 61,288.00