Question

E12-6 (Recording and Amortization of Intangibles) Rolanda Marshall Company, organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014. 1/2/14 Purchased patent (8-year life) $ 350,000 4/1/14 Purchase goodwill (indefi nite life) 360,000 7/1/14 Purchased franchise with 10-year life; expiration date 7/1/24 450,000 8/1/14 Payment of copyright (5-year life) 156,000 9/1/14 Research and development costs 215,000 $1,531,000 Instructions Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2014, recording any necessary amortization and reflecting all balances accurately as of that date. (Use straight-line amortization.) please explain answer

Answer 1

Account Titles and Explanation	Debit	Credit
Patent	$350,000
Goodwill	$360,000
Franchises	$450,000
Copyrights	$156,000
Research and Development Expense	$215,000
Intangible Assets		$1,531,000
Amortization Expense	$79,250
Patent ($350,000 / 8)		$43,750
Franchises ($450,000 / 10) × 6/12		$22,500
Copyrights ($156,000 / 5) × 5/12		$13,000
Balance of Intangible Assets as of December 31, 2014
Patent	$306,250
Goodwill	$360,000
Franchises	$427,500
Copyrights	$143,000