Question

Exercise 12-8 Sheridan Company has provided information on intangible assets as follows. A patent was purchased from Ford Company for $2,673,000 on January 1, 2016. Sheridan estimated the remaining useful life of the patent to be 10 years. The patent was carried in Ford’s accounting records at a net book value of $2,046,000 when Ford sold it to Sheridan. During 2017, a franchise was purchased from Polo Company for $567,000. In addition, 5% of revenue from the franchise must be paid to Polo. Revenue from the franchise for 2017 was $2,719,000. Sheridan estimates the useful life of the franchise to be 10 years and takes a full year’s amortization in the year of purchase. Sheridan incurred research and development costs in 2017 as follows. Materials and equipment $143,000 Personnel 191,200 Indirect costs 109,700 $443,900 Sheridan estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses. On January 1, 2017, because of recent events in the field, Sheridan estimates that the remaining life of the patent purchased on January 1, 2016, is only 5 years from January 1, 2017. Prepare the intangibles section of Sheridan’s balance sheet at December 31, 2017. (Enter account name only and do not provide descriptive information.) SHERIDAN COMPANY Intangibles Section of Balance Sheet $ $ Prepare the income statement effect (related to expenses) for the year ended December 31, 2017, as a result of the facts above. (Enter account name only and do not provide descriptive information.) SHERIDAN COMPANY Income Statement Effect : $ : $ $

Answer 1

Answer o Page No 0 intangible section of sheridan'balance sheet art dec 31, 2017 cost of patent on the date of parchase = $ 2673000 mur Amortization for year ended dec 31, 2016 - 2673000 toyeos = $267300 mornization for year ended dec 31, 2017 = 2643000 - 267300 5 ea77, = 2405700 = $481140 Patents balance = (2673000 – 267300)- 481140 E 2405700 - 481140 : $1904560 cost of Patent on the date of purchase = $ 567000 564000 Amortization for year ended on dec 31, 2017 = 667000 = $ 56400

Page No ③ Franchise balance - $ 567000 - $ 56700 6 = $510300 Amount Intangible Sections of balance sheet Particular Intangible Assets : Patent Franchise $1924560 $ 510300 $2434860 Total intangible assets Income statement of best thing the year ended dec 31, 2017 Particular Amounts I Amount Patents for one face company Amortization of Patent $ 481140 Franchise from Pelo company Aroortization of franchise $ 56700 Payment to Polo company against revenue $135950 $192650 Research & development cost $ 443900 Total charged against income $1117690