Question

Ivanhoe Limited organized late in 2019 and set up a single account for all intangible assets. The following summary shows the entries in 2020 (all debits) that have been recorded in Intangible Assets since then: Jan. 2 Purchased patent (8-year life) $338,000 Mar. 31 Costs to search for new ways to apply patent that was purchased on Jan. 2 21,000 Apr. 1 Purchased goodwill (indefinite life) 314,000 July Purchased franchise with 10-year life; expiration date July 1, 2030 257,000 1 Promotional costs to increase the future economic benefit of the goodwill that was purchased on Apr. 1 1 33,000 Payment for copyright (5-year life) 141,600 Aug. 1 Purchased trademark (3-year life) 1 14,400 Purchased customer list (2-year life) 1 8,400 Sept. 1 Research costs 238,000 $1,365,400

Answer 1

Please refer the working attached below.

Thanks

Credit Debit 338,000 $ JOURNAL ENTRIES IN THE BOOKS OF IVANHOE LTD Date Particulars Jan-02 Intangible Assets - Patents To cash (To record purchase of patent) Mar-31 Research and Development Expenses (Refer Note 1) To Cash $ 338,000 $ 21,000 $ (To record cost to search new ways to apply Patent which doesn't meet capitalisation criteria) (Refer Note 2) $ 314,000 Apr-01 Goodwill To Cash Note 1: The cost to research new ways to apply patent is 21,000 incurred after patent purchased and cost of research should not be capitalised as an 'intangible asset'. It must be treated as expenses. Note 2: Self generated goodwill shall not be capitalised 314,000 but purchased goodwill shall be capitalised. In this case, the goodwill is purchased.Hence capitalised. If Goodwill has indefinite life, then 'Impairment Test' must be done annually to write down 'Goodwill' to the extent impaired. $ (To record purchase of Goodwill) $ 257,000 $ 257,000 $ 33,000 Note 3: Promotional cost incurred shall always be treated 33,000 as 'expenses' and shall not be capitalised. $ $ 141,600 $ 141,600 Jul-01 Franchises To Cash (To record purchase of Franchise with 10 years life) Jul-01 Advertising Expenses (Refer Note 3) To Cash (To record promotional cost incurred) Aug-01 Intangible Assets - Copyrights To Cash (To record purchase of copyright) Aug-01 Intangible Assets - Trademarks To Cash (To record purchase of Trademark) Aug-01 Intangible Assets - Customer Lists (Refer Note 4) To Cash (To record purchase of Customer Lists) Sep-01 Research and Development Expenses (Refer Note 5) To Cash (To record research cost) $ 14,400 $ 14,400 $ 8,400 $ Note 4: The acquired customer list shall be treated as 8,400 l'intangible asset' only if the control is esatblished. Here it is assumed that control over customer list is established Note 5: The cost to research should not be capitalised as an 7,200 intangible asset'. It must be treated as expenses. 7,200 $

$ 42,250 $ 42,250 $ 12,850 $ 12,850 $ 11,800 YEAR END ENTRIES (DEPRECIATION) (Refer Depreciation Working) Dec-31 Depreciation Expense To Accumulated Depreciation - Patents (To record depreciation on patents) Dec-31 Depreciation Expense To Accumulated Depreciation - Franchises (To record depreciation on Franchises) Dec-31 Depreciation Expense To Accumulated Depreciation - Copyrights (To record depreciation on copyrights) Dec-31 Depreciation Expense To Accumulated Depreciation - Trademarks (To record depreciation on Trademarks) Dec-31 Depreciation Expense To Accumulated Depreciation - Customer List (To record depreciation on Customner List) $ 11,800 $ 2,000 $ 2,000 $ 1,750 $ 1,750 Amount of Asset to be reported on December 31, 2020 (Refer Depreciation Working) Particulars Amount ($) Patents $ 295,750 Franchises $ 244,150 Copyright $ 129,800 Trademark $ 12,400 Customer List $ 6,650 Goodwill $ 314,000

Depreciation Working Asset Name Cost of Asset Depreciation per year Purchase Date Months used in the year Depreciation closing balance of Asset Life (In Years) B E G=A-F Patents Franchises Copyright Trademark Customer List Goodwill $ $ $ $ $ $ A 338,000 257,000 141,600 14,400 8,400 314,000 NWU 5 00 C = A/B ID 42,250 Jan-02 25,700 Jul-01 28,320 Aug-01 4,800 Aug-01 4,200 Aug-01 Apr-01 F=C*(E/ 12months) 42,250 $ 12,850 $ 11,800 $ 2,000 $ 1,750 295,750 244,150 129,800 12,400 6,650 314,000