Question

Exercise 11-18 Amortization (LO11-4, 11-5] Janes Company provided the following information on intangible assets a. A patent was purchased from the Lou Company for $1650,000 on January 2016 Janes estimated the remaining useffe of the patent to be 10 years. The patent was carried on Lou's accounting records at a netbook value of $540,000 when Lou sold to Janes b During 2018, a franchise was purchased from the Rink Company for $590.000 The contractual life of the franchise is 10 years and Janes records a full year of amortization in the year of purchase Janes incurred research and development costs in 2018 as follows Materials and supplies Personnel Indirect costs Effective January 2018, based on new events that have occurred. Janes estimates that the remaining life of the patent purchased from Lou is only five more years Required: 1. Prepare the entries necessary for years 2016 through 2018 to reflect the above information 2. Prepare a schedule showing the intangible astet section of Janes's December 2018, bolanice sheet Complete this question by entering your answers in the tabs below. Required 1 beamed Required 2. Presere schedule showing the rang deset section of aners December 21 December 31, 2018 Intangible sets L Total Wang s

Answer 1

Janes Company Journal Enteries Date Particulars 1.1.2016 Patent a/c To Cash Dr. Debit in $ Credit in $ 1650000 1650000 165000 31.12.2016 Amortization expense a/c Dr. To Patent 1650000 / 10 = 165000 165000 165000 31.12.2017 Amortization expense a/c Dr. To Patent 165000 2018 Dr. 690000 Franchise a/c To Cash 690000 2018 69000 Amortization expense a/c Dr. To Franchise 690000 / 10 = 69000 69000 437000 20.5.2018 Research and development expense a/c Dr. To Cash 437000 264000 31.12.2018 Amortization expense a/c Dr. To Patent (1650000 - 165000 - 165000)/5 = 264000 264000 Balance sheet As at 31.12.2018 Intangible Assets: Patent Franchise Total Intangibles 1056000 621000 1677000 1650000 - 165000 - 165000 - 264000 = 1677000 690000 - 69000 = 621000