Question

Taylor Lewis Company has provided information on intangible assets as follows: a. During 2015, a patent was purchased from Craig Company for $4,000,000 on June 1, 2015. Lewis estimated the remaining useful life of the patent to be eight years. The patent was carried in Craig’s accounting records at a net book value of $3,500,000 when Craig sold it to Lewis. On January 1, 2016, because of recent events in the field, Lewis estimates that the remaining life of the patent purchased on June 1, 2015, is only five years from January 1, 2016. b. During 2016, a franchise was purchased from Faragher Company for $360,000. Lewis estimates the useful life of the franchise to be 12 years and takes a full year’s amortization in the year of purchase. In addition, 8% of revenue from the franchise must be paid to Faragher each year. Revenue from the franchise for 2016 was $1,950,000. c. Lewis incurred research and development costs in 2016 as follows: Materials and equipment $286,500 Personnel $153,700 Indirect costs $95,355 Total $535,555 Lewis estimates that these costs will be recouped by December 31, 2019. The materials and equipment purchases have no alternative uses. Required: 1. Prepare a partial balance sheet showing the intangible section only of Lewis’s balance sheet as of December 31, 2016. Show supporting computations in good form. 2. Prepare a partial income statement showing the income statement effect for the year ended December 31, 2016, as a result of the facts above. Show supporting computations in good form.

Answer 1

intangible- Excel File Home Insert Page Layout Formulas Data Review View Tell me what you want to do... Sign in Share PRODUCT NOTICE Excel hasn't been activated. To keep using Excel without interruption, activate before Wednesday, August 22, 2018. Activate G11 Taylor Lewis Company Intangibles Section of Balancesheet as on 31st December,2016 4 Intangible assets 5 Patents 6 Franchises $3,040,000.00 $330,000.00 8 Total Intangible Assets $3,370,000.00 10 12 Schedule 1:Calculation of patent from Craig company 13 14 Cost of patent at date of purchase 15 Less:- Amortization of patent for year 2015 (6 months) (4000000/10)/2 16 Closing balance 17 Less:- Amortization of patent for year 2016 18 Closing balance 19 20 Schedule 1: Calculation of franchise from Faragher company 21 22 Cost of franchise at date of purchase 23 Less:-Amortization for the period 2016 24 Closing balance 25 $4,000,000.00 200,000.00 $3,800,000.00 $760,000.00 $3,040,000.00 (3800000/5) $360,000.00 30,000.00 $330,000.00 (360000/12) Partial BS Partial Income statement Ready 回凹. + 100% 5:37 PM ) ENG2/27/2018 O Type here to search

intangible- Excel File Home Insert Page Layout Formulas Data Review View Tell me what you want to do... Sign in Share PRODUCT NOTICE Excel hasn't been activated. To keep using Excel without interruption, activate before Wednesday, August 22, 2018. Activate A6 x fr Less :-Expenses Taylor Lewis Company Income Statement for the period ended 31st December, 2016 1,950,000.00 51,950,000.00 4 Revenue 6 Less:-Expenses 7 Amortization for patent 8 Amortization for franchise 9 Payment to fragher company 10 Research & development costs $760,000.00 30,000.00 $156,000.00 $535,555.00 ( 1950000"8% $1,481,555.00 12 13 14 Net income 15 16 17 18 19 20 21 $468,445.00 23 24 25 Partial BS Partial Income statement 回凹. + 100% 5:37 PM O Type here to search R ^ . 41) ENG 2/27/2018