Question

Problem 9-05A a-c

The intangible assets section of Indigo Corporation's balance sheet at December 31, 2022, is presented here.

Patents ($84,700 cost less $8,600 amortization)	$76,100
Copyrights ($42,500 cost less $30,700 amortization)	11,800
Total	$87,900

The patent was acquired in January 2022 and has a useful life of 10 years. The copyright was acquired in January 2016 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2023.

Jan. 2 Paid $ 45,000 legal costs to successfully defend the patent against infringement by another company.

Jan.- June Developed a new product, incurring $ 245,500 in research and development costs. A patent was granted for the product on July 1 , and its useful life is equal to its legal life. Legal and other costs for the patent were $ 30,000.

Sept. 1 Paid $ 54,000 to a quarterback to appear in commercials advertising the company's products. The commercials will air in September and October.

Oct. 1 Acquired a copyright for $ 220,000. The copyright has a useful life and legal life of 50 years.

Answer 1

Journal Entries:
Date	Account Titles and Explanation	Debit	Credit
Jan.2	Patents	$45,000
	Cash		$45,000
Jan.-June	Research and Developments Expenses	$245,500
	Cash		$245,500
Jan.-June	Patents	$30,000
	Cash		$30,000
Sept. 1	Advertising Expenses	$54,000
	Cash		$54,000
Oct. 1	Copyrights	$220,000
	Cash		$220,000
Adjusting Entries:
Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Amortization Expense [($76,100/9 years) + ($45,000 + $30,000)/10 years]	$15,956
	Patents		$15,956
Dec. 31	Amortization Expense [($42,500/10 years) + ($220,000/50 years = $4,400*2/12 months)	$4,983
	Copy Rights		$4,983

Indigo Corporation
Balance Sheet (Partial)
December. 31, 2023
Intangible Assets:
Patents ($76,100 + $45,000 + $30,000 = $151,100 - $15,956)	$135,144
Copy Rights ($11,800 + $220,000 = $231,800 - $4,983)	$226,817
Total Intangible Assets	$361,961