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Answer:
Oriole Company
a. Journal Entries:
1. December 31, 2020:
Accounts Titles Debit Credit
Patent $311,500
Goodwill 355,000
Franchise 435,000
Copyright 162,000
R & D expense 225,000
Intangibles $1,488,500
To transfer out to individual intangible accounts.
2. Amortization Expense:
Accounts Titles Debit Credit
Debit Amortization Expenses:
Patent $44,500
Franchise $21,750
Copyright $13,500
Accumulated amortization $79,950
To record amortization expense for the year.
3. December 31, 2020 balances:
December 31, 2020 Balances:
Book Value Amortization Expense Net Book Balance
Patent $311,500 $44,500 $267,000
Goodwill 355,000 $0 $355,000
Franchise 435,000 $21,750 $413,250
Copyright 162,000 $13,500 $148,500
R & D expense 225,000 $225,000 $0
Explanation:
a) Data and Calculations:
1/2/20 Purchased patent (7-year life) $311,500
4/1/20 Purchase goodwill (indefinite life) 355,000
7/1/20 Purchased franchise with 10-year life; expiration date 7/1/30 435,000
8/1/20 Payment of copyright (5-year life) 162,000
9/1/20 Research and development costs 225,000
$1,488,500
Amortization Expenses:
Patent = $44,500 ($311,500/7)
Goodwill = $0
Franchise = $21,750 ($435,000/10 * 6/12)
Copyright = $13,500 ($162,000/5 * 5/12)
Total = $79,950
December 31, 2020 Balances:
Book Value Amortization Expense Net Book Balance
Patent $311,500 $44,500 $267,000
Goodwill 355,000 $0 $355,000
Franchise 435,000 $21,750 $413,250
Copyright 162,000 $13,500 $148,500
R & D expense 225,000 $225,000 $0