Reichenbach Co., organized in 2013, has set up a single account for all intangib
ID: 2480953 • Letter: R
Question
Reichenbach Co., organized in 2013, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2014 and 2015.
Intangible Assets
Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2015, recording any necessary amortization. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round all answers to 0 decimal places, e.g. 8,564.)
Account Titles and Explanation
Debit
Credit
(To clear the Intangible Assets)
(To record current amount for Franchises)
(To record current amount for Rents)
(To record current amount for Patents)
Reflecting all balances accurately as of that date. (Ignore income tax effects.)
Open Show Work
Intangible Assets
7/1/14 8-year franchise; expiration date 6/30/22 $63,120 10/1/14 Advance payment on laboratory space (2-year lease) 25,620 12/31/14 Net loss for 2013 including state incorporation fee, $1,020, and related legal fees of organizing, $5,990 (all fees incurred in 2013) 17,580 1/2/15 Patent purchased (10-year life) 87,620 3/1/15 Cost of developing a secret formula (indefinite life) 71,400 4/1/15 Goodwill purchased (indefinite life) 278,430 6/1/15 Legal fee for successful defense of patent purchased above 18,170 9/1/15 Research and development costs 176,100Explanation / Answer
Franchises
63,120
Prepaid rent
25,620
Retained earnings
17,580
Patents(87620+18170)
105,790
Research and development
(71,400+176,100)
247,500
Good will
278,430
To Intangible asset
$748,610
Franchise amortization expense(63,120/8)
7,890
Retained earnings
(63,120/8*6/12)
3,945
To Franchises
11,835
Rent expense (25,620/2)
12,810
Retained earnings (25,620/2*3/12)
3,203
To Prepaid rent
16,013
Patent amortization expense
9,868
To Patents
(87,620/10)+(18,170*7/115)
9,868
Balances
Franchise 63,120 – 11,835 = $51,285
Prepaid rent 25,620 – 16,013 = $9,607
Patents 105,790 – 9868 = 95,922
Goodwill 278,430
Franchises
63,120
Prepaid rent
25,620
Retained earnings
17,580
Patents(87620+18170)
105,790
Research and development
(71,400+176,100)
247,500
Good will
278,430
To Intangible asset
$748,610
Franchise amortization expense(63,120/8)
7,890
Retained earnings
(63,120/8*6/12)
3,945
To Franchises
11,835
Rent expense (25,620/2)
12,810
Retained earnings (25,620/2*3/12)
3,203
To Prepaid rent
16,013
Patent amortization expense
9,868
To Patents
(87,620/10)+(18,170*7/115)
9,868