Question

As the recently appointed auditor for Blue Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2020, are prepared. The controller for Blue Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 931,000 931,000 Jan. 5 Legal costs to obtain patent 72,240 1,003,240 Jan. 31 Payment of 7 months' rent on property leased by Blue 34,700 1,087,940 Feb. 11 Premium on common stock 231.000 856,940 March 31 Unamortized bond discount on bonds due March 31, 2040 86,400 943,340 April 30 Promotional expenses related to start-up of business 1.151,640 208,300 259,000 June 30 Operating losses for first months 1.410,640

Answer 1

1 Date B Particulars Research and Development expense Intangible Assets - Patents Rent Expense[(5/7)*$84700] Prepaid Rent[(2/7)*$84700] |Advertising Expense Income Summary Discount on Note Payable Interest Expense Common Shares Intangible Assets с Debit($) Credit($) 931000 72240 60500 24200 208300 259000 85320 1080 231000 1410640 12 13 14 *Assuming Straight line amortizatin: ($86400/240*months)*3 = $1080 $86400-$1080 = $85320 15 16 17 Amortization Expense Accumulated Amortization-Patents [($72240/10)*1/2] 18 19 3612) 3612