Question

Problem 10-4 Intangibles (LO10-1, 10-8] The Horstmeyer Corporation commenced operations Cailyn 2018 Anumber of expenditures were made during 2018 that were debiled to one account called intangible asset Arecap of the $180 500 balance in this account at the end of 2018 is as follows. the corporation State Incorporation fees and it costs related to 3/1/18 Fire Insurance presiun for three yee period 1/15/18 Purchased copyright 6/15/18 Legal fees for thing a patent on product resulting from 9/30/la Leal fee for successful defense of patient d one 10/13/18 Fetered into . 1 year franchise free with franchisor Various Advertising costs D e t Required: Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. If no entry is required for a transaction event select "No journal entry required in the first account field.) Journal entry worksheet Record the entry to redassily various expenditures incorrectly charged to th View ournal

Answer 1

Prepare the journal entries to record the various expenditure incorrectly charged to the intangible asset account Particulars DR CR $ 6,000.00 $ 5,000.00 $27,000.00 $47,000.00 $19,000.00 $47,000.00 $23,000.00 Organization cost expense Prepaid insurance Copyright Research and development expense Patent franchise Advertising expense Intangible asset $1,74,000.00 To record the cash expenditures Explanation Organization cost expense is an expense account. Expenses and losses reduce Equity value. Therefore, debit Organization cost expense account with 6000. Prepaid insurance is an asset and increase the asset account. Therefore, debit prepaid insurance account with 5000. Copyright is an intangible asset account and the amount has increased because copyright is purchased; therefore, debit Copyright account with 17000. Research and development expense is an expense account. Expenses and losses reduce Equity value. Therefore, debit Research and development expense account with 47000. Patent is an intangible asset account and the amount has increased because patent is purchased; therefore, debit Patent account with 25500. Franchise is an asset and increases the asset. Therefore, debit franchise account with 47000. Advertising expense is an expense account. Expenses and losses reduce Equity value. Therefore, debit Advertising expense account with 23000. Intangible asset is an asset account. The amount has decreased because the expenditures are incorrectly charged to the intangible asset account. Therefore, credit Intangible asset account with 174000. Legal fee for filinf a patent Legal fees for defense $ 6,500.00 $19,000.00 $ 25,500.00 Patent cost