FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
) Young Company has provided information on intan- gible assets as follows.
A patent was purchased from Ford Company for $1,000,000 on January 1, 2019. Young estimated the remaining useful life of the patent to be 10 years. The patent was carried in Ford’s accounting records at a net book value of $800,000 when Ford sold it to Young.
During 2020, a franchise was purchased from Rainwater Company for $950,000. In addition, 5% of revenue from the franchise must be paid to Rainwater. Revenue from the franchise for 2020 was $6,000,000. Young estimates the useful life of the franchise to be 10 years and takes a full year’s amortization in the year of purchase.
Young incurred research and development costs in 2020 as follows:
|
Materials and equipment |
$336,000 |
|
Personnel |
278,000 |
|
Indirect costs |
173,000 |
|
|
$787,000 |
Young estimates that these costs will be recouped by December 31, 2020. The materials and equipment purchased have no alternative uses.
On January 1, 2020, because of recent events in the field, Young estimates that the remaining life of the patent purchased on January 1, 2019, is only 5 years from January 1, 2020.
Instructions
- Prepare a schedule showing the intangibles section of Young’s
balance sheet at December 31, 2020 Show supporting computations in good form. - Prepare a schedule showing the income statement effect (related to expenses) for the year ended December 31, 2020 as a result of the facts above. Show supporting computations in good
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