Question

Gladow Corporation began operations in 2020 and has these transactions related to intangible assets in that year: Jan. 2 Purchased a patent (5-year life) $276,000 Apr. 1 Goodwill purchased as part of an acquisition of another company $331,000 Jul. 1 Acquired a 9-year franchise; expiration date July 1, 2025 $496,800 Dec. 31 Determined that the recoverable amount of the patent and franchise be $161,000 and $483,000 respectively. There was no indication that the goodwill was impaired.

(a) Your answer is correct. Prepare the necessary entries to record these intangibles. Assume all costs incurred were for cash. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. 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. 2 Apr. 1 (Part of the entry to record purchase of another company) Jul. 1 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 1 of 2 used

(b) Prepare any adjusting journal entries required at December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. 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 Dec. 31 (Amortization of Patent) Dec. 31 (Amortization of Franchise) Dec. 31 (Impairment of Patent) Dec. 31 (Impairment of Franchises) Dec. 31 (Impairment of Goodwill) Part (b) only

Answer 1

Patent amortization per year=276000/5=55200
At end of year book value=276000-55200=$220,800
Recoverable amount of patent=161000
Impairement loss=220800-161000=59800

franchise rights amortization per month=496800/(9*12)=4600
Amortization for year=4600*6=27600
At end of year book value=496800-(4600*6)=$469,200
Recoverable amount of patent=483000
There is no impairment here

Date Account tilte and explanation Debit Credit Jan.2 Patent 276,000 Cash 276,000 Record the patent purchased for cash Apr.1 Goodwill 331,000 Cash 331,000 Record the goodwill purchased for cash Jul.1 Franchise rights 496,800 Cash 496,800 Record the franchise rights purchased for cash b) Date Account tilte and explanation Debit Credit Dec.31 Amortization expense 55,200 Patent | 55,200 Amortization of patent Dec.31 Amortization expense 27,600 Franchise rights 27,600 Amortization of franchise Dec.31 impairement loss 59.800 Patent 59.800 impairement of patent Dec 31 No entry No entry impairement of franchises Dec.31 No entry No entry impairement of goodwill