Question

Reichenbach Co., organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014 and 2015.

Intangible Assets

 

Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2015, recording any necessary amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round all answers to 0 decimal places, e.g. 8,564.)

Account Titles and Explanation

Debit

Credit

(To clear the Intangible Assets)

(To record current amount for Franchises)

(To record current amount for Rents)

(To record current amount for Patents)

 

 

Reflecting all balances accurately as of that date. (Ignore income tax effects.)

Open Show Work

Intangible Assets

7/1/14

 

8-year franchise; expiration date 6/30/22

 

$63,120

10/1/14

 

Advance payment on laboratory space (2-year lease)

 

25,620

12/31/14

 

Net loss for 2013 including state incorporation fee, $1,020,

 

 

 

 

   and related legal fees of organizing, $5,990 (all fees incurred in 2013)

 

17,580

1/2/15

 

Patent purchased (10-year life)

 

87,620

3/1/15

 

Cost of developing a secret formula (indefinite life)

 

71,400

4/1/15

 

Goodwill purchased (indefinite life)

 

278,430

6/1/15

 

Legal fee for successful defense of patent purchased above

 

18,170

9/1/15

 

Research and development costs

 

176,100

         

 



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