50.1K

Verified Solution

Link Copied!

The intangible assets section of Larkspur, Inc. at December 31, 2020, is presented below.

Patents ($72,000 cost less $7,200 amortization)		$64,800
Franchises ($48,000 cost less $19,200 amortization)		28,800
Total		$93,600

The patent was acquired in January 2020 and has a useful life of 10 years. The franchise was acquired in January 2017 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2021.

Jan. 2		Paid $22,500 legal costs to successfully defend the patent against infringement by another company.
Jan.June		Developed a new product, incurring $131,000 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 $46,000 to an extremely large defensive lineman to appear in commercials advertising the companys products. The commercials will air in September and October.
Oct. 1		Acquired a franchise for $124,000. The franchise has a useful life of 50 years.

Instructions

Prepare journal entries to record the transactions above.

Prepare journal entries to record the 2021 amortization expense.

Prepare the intangible assets section of the balance sheet at December 31, 2021.

Answer & Explanation Solved by verified expert

See Answer