Question

Exercise 9-12 On January 1, 2017, Cullumber Company had a balance of $386,500 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year. The goodwill had an indefinite life. During 2017, the company had the following additional transactions. Jan. 2 July 1 Sept. 1 Purchased a patent (6-year life) $362,250. Acquired a 9-year franchise; expiration date July 1, 2026, $554,400. Research and development costs $185,500. Prepare the necessary entries to record the transactions related to intangibles. All costs incurred were for cash. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit 1/2/17 v Patents 386500 Cash 386500 7/1/17 v Franchise 554400 Cash 554400 9/1/17 v Research and Development Expense 185500 Cash 185500

Answer 1

Cost of patent = $362,250

Useful life = 6 years

Annual amortization of patent = Cost of patent/ Useful life

= 362,250/6

= $60,375

Cost of Franchise = $554,400

Useful life = 9 years

Annual amortization of Franchise = Cost of Franchise/ Useful life

= 554,400/9

= $61,600

Amortization of Franchise for the year 2017 = Annual amortization of Franchise x 1/2

= 61,600 x 1/2

= $30,800

Date	Account Title and Explanation	Debit	Credit
December 31, 2017	Amortization expense	$60,375
	Patent		$60,375
December 31, 2017	Amortization expense	$30,800
	Franchise		$30,800

Patent on December 31, 2017 = Cost of Patent - Amortization expense for 2017

= 362,250-60,375

= $301,875

Franchise on December 31, 2017 = Cost of Franchise - Amortization expense for 2017

= 554,400-30,800

= $523,600

Kindly comment if you need further assistance.

Thanks‼!