Homework Answers
Solution:
Prepare the intangibles section of sandhill's balance sheet at December 31,2020
| Intangible section of balance sheet | |
| Patent from ford company | $1,260,000 |
| Franchise from polo company | $405,000 |
| Total intangible assets | $1,665,000 |
Working :
1) calculation of book value of patent
Yearly amortization expense = 1,750,000 / 10
= 175,000
Book value of patent on 31st Dec 2019 = 1,750,000 - 175,000
=1,575,000
Amortization expense = 1,575,000 /5
= 315,000
Book value od patent on 31 dec 2019 =$1,575,00 - $315,000
=$1,260,000
2) Calculation of book value of franchise
Amortization expenses = $450,000 / 10
=$45,000
Book value of franchise on 31 dec 2020 = $450,000 - $45,000
=$405,000
Prepare the income statement effect for the year ended December 31,2020 as a result of the facts above
| Income statement effect | ||
| Patent amortization | $315,000 | |
| Franchise from Monly company | ||
| Amortization expense | $45,000 | |
| Payment to Monly company(2,380,000 * 5%) | $119,000 | |
| $164,000 | ||
| Research and development cost | $450,000 | |
| 929,000 |
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accounting records at a net book value of $1,650,000 when Larkspur
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accounting records at a net book value of $1,650,000 when Tamarisk
sold it to Carla Vista.
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Exercise 12-8
Sunland Company has provided information on intangible assets as
follows.
A patent was purchased from Ford Company for $2,506,000 on January
1, 2016. Sunland 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 $1,968,000 when Ford sold it to
Sunland.
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$530,000. In addition, 4% of revenue from the franchise must be...
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Cullumber Company has provided information on intangible assets
as follows.
A patent was purchased from Marin Company for $1,800,000 on January
1, 2019. Cullumber estimated the remaining useful life of the
patent to be 10 years. The patent was carried in Marin’s accounting
records at a net book value of $1,800,000 when Marin sold it to
Cullumber.
During 2020, a franchise was purchased from Bramble Company for
$510,000. In addition, 5% of revenue from the franchise must be
paid to...
Carla Vista Company has provided information on intangible
assets as follows.
A patent was purchased from Tamarisk Company for $1,650,000 on
January 1, 2019. Carla Vista estimated the remaining useful life of
the patent to be 10 years. The patent was carried in Tamarisk’s
accounting records at a net book value of $1,650,000 when Tamarisk
sold it to Carla Vista.
During 2020, a franchise was purchased from Flint Company for
$500,000. In addition, 5% of revenue from the franchise must...
Sheridan Company has provided information on intangible assets as follows. A patent was purchased from Skysong Company for $1,750,000 on January 1, 2019. Sheridan estimated the remaining useful life of the patent to be 10 years. The patent was carried in Skysong's accounting records at a net book value of $1,750,000 when Skysong sold it to Sheridan. During 2020, a franchise was purchased from Grouper Company for $530,000. In addition, 5% of revenue from the franchise must be paid to...
Pharoah Company has provided information on intangible assets as follows. A patent was purchased from Shamrock Company for $1,600,000 on January 1, 2019. Pharoah estimated the remaining useful life of the patent to be 10 years. The patent was carried in Shamrock's accounting records at a net book value of $1,600,000 when Shamrock sold it to Pharoah. During 2020, a franchise was purchased from Sheffield Company for $490,000. In addition, 5% of revenue from the franchise must be paid to...
Crane Company has provided information on intangible assets as
follows.
A patent was purchased from Larkspur Company for $1,650,000 on
January 1, 2019. Crane estimated the remaining useful life of the
patent to be 10 years. The patent was carried in Larkspur’s
accounting records at a net book value of $1,650,000 when Larkspur
sold it to Crane.
During 2020, a franchise was purchased from Pronghorn Company for
$480,000. In addition, 5% of revenue from the franchise must be
paid to...
Crane Company has provided information on intangible assets as follows. A patent was purchased from Ford Company for $2,330,000 on January 1, 2016. Crane 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 $2,053,000 when Ford sold it to Crane. During 2017, a franchise was purchased from Polo Company for $513,000. In addition, 4% of revenue from the franchise must be paid to...
Carla Vista Company has provided information on intangible
assets as follows.
A patent was purchased from Tamarisk Company for $1,650,000 on
January 1, 2019. Carla Vista estimated the remaining useful life of
the patent to be 10 years. The patent was carried in Tamarisk’s
accounting records at a net book value of $1,650,000 when Tamarisk
sold it to Carla Vista.
During 2020, a franchise was purchased from Flint Company for
$500,000. In addition, 5% of revenue from the franchise must...
Exercise 12-8
Sunland Company has provided information on intangible assets as
follows.
A patent was purchased from Ford Company for $2,506,000 on January
1, 2016. Sunland 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 $1,968,000 when Ford sold it to
Sunland.
During 2017, a franchise was purchased from Polo Company for
$530,000. In addition, 4% of revenue from the franchise must be...
Cullumber Company has provided information on intangible assets
as follows.
A patent was purchased from Marin Company for $1,800,000 on January
1, 2019. Cullumber estimated the remaining useful life of the
patent to be 10 years. The patent was carried in Marin’s accounting
records at a net book value of $1,800,000 when Marin sold it to
Cullumber.
During 2020, a franchise was purchased from Bramble Company for
$510,000. In addition, 5% of revenue from the franchise must be
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