Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281



Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem

Byrd Corporation engaged in the following transactions at the beginning of 2019:

  1. a. Purchased a Hogburger franchise for a 5-year, $60,000, 10% interest-bearing note. The franchise has an indefinite life providing the terms of the franchise are not violated.
  2. b. Sold a trade name for $50,000. The trade name had a carrying value of $5,000.
  3. c. Paid an advertising agency $60,000 for advertisements to promote a new trade name. The advertisements will begin in 2020.
  4. d. Incurred legal fees of $5,000 to register a new trade name.
  5. e. Purchased the copyright to a new movie for $500,000. The movie is made during 2019 at a cost of $15 million. It will begin showing in 2020 and is expected to gross $10 million during 2020, $20 million during 2021, and $10 million during 2022.


  1. 1. Prepare journal entries to record the preceding transactions, including any appropriate adjusting entries for 2019.
  2. 2. Next Level With regard to the copyright in Transaction e, what factors should Byrd consider in selecting an amortization method.


To determine

Prepare journal entries and necessary adjusting entries for the given transaction of Company B for 2019.


Franchise: Franchise is a type of business organization in which the owner (franchisor) grants legal right to an individual or company (franchisee) to sell goods and services of the franchisor, in some particular geographical areas.

Copyright: Copyright is the legal right granted to the writers, musicians, artists, and owners to recreate, or develop their original work. In simple words, it is right to copy by the authors.

Trademark: It is an exclusive right of an entity or business to display its identity of the products or goods through a registered word, symbol, or emblem.

Prepare journal entries for the given transaction of Company B for 2019 as follows:

DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
2019a.Franchise  60,000 
  Notes Payable  60,000
  (To record the purchase of franchise by signing a note )   
 b.Cash 50,000 
  Gain on Sale of Trade Name  45,000
  Trade Name  5,000
  (To record the sale of trade name)   
 c.Prepaid Advertising  60,000
  (To record the payment made for advertisement to promote a trade name)   
 d.Trade Name 5,000 
  Cash  5,000
  (To record the legal fees incurred to register new trade name)   


To determine

State the factors that the company should consider in selecting an amortization method, in transaction e.

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