Barb Company has provided information on intangible assets as follows:1. A patent was purchased from Lou Company for $1,500,000 on January1, 2018. Barb estimated the remaining useful life of the patent to be 10years. The patent was carried in Lou's accounting records at a net bookvalue of $1,250,000 when Lou sold it to Barb. 2. During 2019, a franchise was purchased from Rink Company for$500,000. In addition, 5% of revenue from the franchise must be paid toRink. Revenue from the franchise for 2019 was $2,000,000. Barbestimates the useful life of the franchise to be 10 years and takes a fullyear's amortization in the year of purchase. 3. Barb incurred R&D costs in 2019 as follows. Materials and equipmentPersonnelIndirect costs $120,000140,00060,000 $320,000 Barb estimates that these costs will be recouped by December 31, 2020. 4. On January 1, 2019, Barb estimates, based on new events, that theremaining life of the patent purchased on January 1, 2018, is only 5 yearsfrom January 1, 2019. Required:1. Prepare the intangibles assets section of Barb's balance sheet atDecember 31, 2019. Show supporting computations. 2. Prepare a schedule showing the income statement effects for the yearended December 31, 2019, as a result of the previously mentioned facts.Show supporting computations.
Barb Company has provided information on intangible assets as follows:
1. A patent was purchased from Lou Company for $1,500,000 on January
1, 2018. Barb estimated the remaining useful life of the patent to be 10
years. The patent was carried in Lou's accounting records at a net book
value of $1,250,000 when Lou sold it to Barb.
2. During 2019, a franchise was purchased from Rink Company for
$500,000. In addition, 5% of revenue from the franchise must be paid to
Rink. Revenue from the franchise for 2019 was $2,000,000. Barb
estimates the useful life of the franchise to be 10 years and takes a full
year's amortization in the year of purchase.
3. Barb incurred R&D costs in 2019 as follows.
| Materials and equipment Personnel Indirect costs |
$120,000 140,000 60,000 |
| $320,000 |
Barb estimates that these costs will be recouped by December 31, 2020.
4. On January 1, 2019, Barb estimates, based on new events, that the
remaining life of the patent purchased on January 1, 2018, is only 5 years
from January 1, 2019.
Required:
1. Prepare the intangibles assets section of Barb's
December 31, 2019. Show supporting computations.
2. Prepare a schedule showing the income statement effects for the year
ended December 31, 2019, as a result of the previously mentioned facts.
Show supporting computations.
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