Question

Exercise 9-10 a-b (Part Level Submission) Sandhill Ltd. has these transactions related to intangible assets and goodwill in 2018, its first year of operations: Purchased a patent with an estimated useful life of five years for $40,280. The company that sold the patent to Collins registered the patent 10 years ago. Jan. 2 Acquired another company and recorded goodwill of $320,700 as part of the purchase. Apr. 1 Acquired a franchise for $234,000. The franchise agreement is renewable without charge and not expected to expire. July 1 Incurred research costs of $142,000 Sept. 1 Incurred development costs of $48,400. A marketable product has been identified and resources have been secured so that production will start next year. 30 Recorded annual amortization. Dec. 31 Tested the intangible assets for impairment. Recoverable amounts exceeded carrying amounts for all intangible assets. Also tested goodwill and determined that it had a recoverable amount of $287,320. 31

Answer 1

Research expense is not a part of Intangible assets,

However, you should enter development cost in its place with amount $48,400.

Statement of financial position (partial)

Assets

Intangible assets Patents 40,280 Less: Accumulated amortization - patents 8,056 32,224 Franchises 234,000 Development cost 48,400 Total intangible assets 314,624 Goodwill 287,320