Question

Crane Company has provided information on intangible assets as follows. A patent was purchased from Ford Company for $2,330,0Prepare the intangibles section of Cranes balance sheet at December 31, 2017. (Enter account name only and do not provide dePrepare the income statement effect (related to expenses) for the year ended December 31, 2017, as a result of the facts abov

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1. Intangibles section of Crane's Balance Sheet:

CRANE COMPANY
Intangibles Section of Balance Sheet
For the year ended December 31,2017
Current Assets
Patent from Ford company, net 1,677,600
Franchise from Polo Company, net 461,700
Total intangibles 2,139,300

Calculation :

Computation of Patent from Ford Company:
Cost of patent at date of purchase 2,330,000
Amortization of patent for 2016 -233,000
2,097,000
Amortization of patent for 2017 -419400
Patent balance 1,677,600
Computation of Franchise from Polo Company
Cost of franchise at date of purchase 513,000
Amortization of franchise for 2017 -51300
Franchise balance 461,700

2. Income Statement Effect :

CRANE COMPANY
Income Statement Effect
For the year ended December 31, 2017
Patent from Ford Company:
Amortization of patent for 2017              419,400
Franchise from Polo Company:
Amortization of franchise            51,300
Payment to Polo Company          103,640
             154,940
Research and development costs              442,700
Total Charged against Income          1,017,040

Calculation :

*Amortization of patent for 2017 = Cost of patent at date of purchase - Amortization of patent for 2016/Remaining Life =

= (2,330,000-233,000)/5 = 2,097,000/5 = 419,400

* Amortization of franchise = Cost of franchise at date of purchase/ useful life

=513,000/10 = 51,300

* Payment to Polo Company = Revenue from Franchise * % of revenue from franchise to pay Polo

= 2591000 * 4% = 103,640

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