Question

This is an interesting one

Problem 10-07A a-c (Video) The intangible assets section of Flint Company at December 31, 2020, is presented below. Patents ($87,000 cost less $8,700 amortization) Franchises ($47,000 cost less $18,800 amortization) $78,300 28,200 $106,500 Total The patent was acquired in January 2020 and has a useful life of 10 years. The franchise was acquired in January 2017 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2021. Paid $18,000 legal costs to successfully defend the patent against infringement by another company. Developed a new product, incurring $143,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. Jan. 2 Jan. - June Sept. 1 Oct. 1 Paid $55,000 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October. Acquired a franchise for $150,000. The franchise has a useful life of 50 years.

Answer 1

Ans:

Date	Account title and explanation	Debit($)	Credit($)
Jan 2	Patents	18000
	Cash		18000
	(paid 18000 legal costs)
Jan-June	Research and developments	143,000
	Cash		143,000
	(being 143,000 incurred for research and developments costs)
Sep 1	Advertising expense	55000
	Cash		55000
	(being paid to appear in lineman advertising)
Oct 1	Franchisee	150,000
	Cash		150,000
	(being paid for franchise)

B).

Date	Account title and explanation	Debit($)	Credit($)
Dec 31	Amortization expense- patents	10,700
	Patents		10,700
	(87000*1/10)+(18000*1/9)
	(to record patents amortization)
Dec 31	Amortization expense- franchisee	5415
	Franchisee		5415
	(47000*1/10)+(143000*1/50*3/12)
	(to record franchisee amortization)

C).Intangible Assets

          Patents ($105,000 cost – $19,400 amortization) (1)...............................................              $ 85,600

          Franchise ($190,000 cost – $24,215 amortization) (2)......................................... $165,785

                    Total intangible assets................................................................................               $251,385

          (1)      Cost ($87,000 + $18,000); amortization ($8,700 + $10,700).

          (2)      Cost ($47,000 + $143,000); amortization ($18,800 + $5,415).