Question

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 Sheffield. Revenue from the franchise for 2020 was $2,320,000. Pharoah estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase. Pharoah incurred research and development costs in 2020 as follows. Materials and equipment $159,000 Personnel 191,000 Indirect costs 114,000 $464,000 Pharoah estimates that these costs will be recouped by December 31, 2023. The materials and equipment purchased have no alternative uses. On January 1, 2020, because of recent events in the field, Pharoah estimates that the remaining life of the patent purchased on January 1, 2019, is only 5 years from January 1, 2020.

Answer 1

working esso 1600000/10 y USD 1440000/5yrs Udo 490000/10yrs | Amount & Particulars cost of patent purchased on 1/01/2019 1600000 Amortization expense for year 2019 160000 Balance of Patent as of 31/12/2019 1440000 Amortization expense for year 2020 2020 288000 Balance of patent as of 31/12/2020 1152000 Cost of franchise purchased on 1/01/2020 490000 Amortization expense for year 2020ť u9000 Balance of Franchise as of 31/12/2020 441000 PHAROAH COMPANY Intangibles sectton of Balance sheet Particulars Intangible assets Patent Franchise Total intangible assets PHAROAH COMPANY Income statemeat Amoreal & Add 1152000 491000 1593000 Loone 1440000/by Particulars Amount & Patent from shamrocle company Amortization expense q Patent for year 2010 288000 Franclúse from Sheffield company Addo Amortization expense of Franchise for yeas 2020 49000 Addo payment to Sheffield Company || 6000 Add: Research and Development Costs 1464000 Total expenses 917000 490000/roy 2520000 X5