The intangible assets section of Sappelt Company at December 31, 2019, is presented below.
The patent was acquired in January 2019 and has a useful life of 10 years. The franchise was acquired in January 2016 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2020
| Jan. 2 | Paid $27,000 legal costs to successfully defend the patent against infringement by another company. |
| Jan.-June | Developed a new product, incurring $140,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. |
| Sept. 1 | Paid $50,000 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October. |
| Oct. 1 | Acquired a franchise for $140,000. The franchise has a useful life of 50 years. |
Instructions
- Prepare journal entries to record the transactions above.
- Prepare journal entries to record the 2020 amortization expense.
- Prepare the intangible assets section of the balance sheet at December 31, 2020.
Solution
a.
Sappelt Company
Journal Entries
Journal Entries
b.
Sappelt Company
Journal Entries for the 2020 amortization expense
Journal Entries for the 2020 amortization expense
c.
Sappelt Company
Intengible assets
Intengible assets
