Question

Prepare accounts calculate E9.15 (LO 4), AN On January 1, 2022, Haley Company had a balance of $360,000 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 2022, the company had the following additional transactions Jan.2 Purchased a patent (5-year life) $280,000. July 1 Acquired a 9-year franchise; expiration date July 1, 2031, $540,000. Sept. 1 Research and development costs $185,000. Instructions a. Prepare the necessary entries to record the transactions related to intangibles. All costs incurred were for cash. b. Make the entries as of December 31, 2022, recording any necessary amortization. c. Indicate what the intangible asset account balances should be on December 31, 2022.

Answer 1

a) Account Titles and Explanation Debit Credit Date $280,000 Jan.2 Patents $280,000 Cash (To record the purchase of patents) July.1 Franchise $540,000 $540,000 Cash (To record the franchise acquired) Research and Development expense Sept.1 $185,000 $185,000 Cash (To record the research and development costs) b) Account Titles and Explanation Debit Credit Date Dec-31 Amortization expense $86,000 Patents ($280,000/5) Franchise ($540,000/9*6 months/ 12 months) (To record the amortization expense) $ 56,000 30,000 c) Patents $280,000-$56,000 $224,000 Franchise = $540,000-$30,000 $510,000