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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Acquisition and Amortization of Intangible Assets

T LM Technologies had these transactions related to intangible assets during 2019.

Jan. 2 Purchased a patent from Luna Industries for $175,000. The remaining legal life of the patent is 15 years, and TLM expects the patent to be useful for 8 years.

Jan. 5 Paid legal fees in a successful legal defense of the patent of $90,000.

June 29 Registered a trademark with the federal government. Registration costs were $4,000. T LM expects to use the trademark indefinitely.

Sept. 2 Paid research and development costs of S478,200.

Required:

1. Prepare the journal entries necessary to record the transactions.

2. Prepare the entries necessary to record amortization expense for the intangible assets.

3. What is the balance of the intangible assets at the end of 2019?

To determine

Concept introduction:

Intangible assets:

Intangible assets are those like tangible assets offer future economic benefits to the company but unlike tangible assets they do not have physical existence. Patents, copyrights, trademarks, leaseholds, franchise etc. are some of the examples of intangible assets.

Patent:

Patent is a right given to the company to manufacture, sell or use a particular product and these rights are usually granted for a period of twenty years.

Trademark:

Trademark is a right specifically granted for the use of a distinctive name, symbol or phrase. It is usually granted for a period of ten years but it can be renewed for an indefinite period.

Requirement 1:

Prepare journal entry to record the transactions of TLM technologies.

Explanation

Jan 2: To prepare the journal entry we have to debit the patent account and credit cash.

Jan 5:
To prepare the journal entry we have to debit the legal fees and credit cash...

To determine

Concept introduction:

Intangible assets:

Intangible assets are those like tangible assets offer future economic benefits to the company but unlike tangible assets they do not have physical existence. Patents, copyrights, trademarks, leaseholds, franchise etc. are some of the examples of intangible assets.

Requirement 2:

To explain:

Prepare journal entry to record amortization expense for the intangible assets.

To determine

Concept introduction:

Intangible assets:

Intangible assets are those like tangible assets offer future economic benefits to the company but unlike tangible assets they do not have physical existence. Patents, copyrights, trademarks, leaseholds, franchise etc. are some of the examples of intangible assets.

Requirement 2:

To explain:

Prepare journal entry to record amortization expense for the intangible assets.

To determine

Concept introduction:

Intangible assets:

Intangible assets are those like tangible assets offer future economic benefits to the company but unlike tangible assets they do not have physical existence. Patents, copyrights, trademarks, leaseholds, franchise etc. are some of the examples of intangible assets.

Requirement 3:

To explain:

Record the balance of the intangible assets at the end of 2019.

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