On January 1, 2017, Sheridan Company had a balance of $417,000 of goodwill on it
ID: 2510855 • Letter: O
Question
On January 1, 2017, Sheridan Company had a balance of $417,000 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year The goodwil had an indefinite life. During 2017, the company had the following additional transactions. Jan. 2 July 1 Sept. 1 Purchased a patent (6-year life) $301,350. Acquired a 10-year franchise; expiration date July 1, 2027, $633,600. Research and development costs $189,000. Your answer is correct. Prepare the necessary entries to record the transactions related to intangibles. All costs incurred were for cash. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, sele "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit 1/2/17 Patents 301,350 Cash 301,350 7/1/17Franchise 533,600 Cash 633,60O 9/1/17Research and Development Expense 189,000 Cash 189,000Explanation / Answer
Purchase Cost of Patent 3,01,350 Less: Salvage Value - Net Value for amortization 3,01,350 Usefule life of the Assets 6 years amortization per year = Value for amortization / 6 years = 50,225 Purchase Cost of Franchise 6,33,600 Less: Salvage Value - Net Value for amortization 6,33,600 Usefule life of the Assets 10 years amortization per year = Value for amortization / 10 years = 63,360 Journal Entries Date Account Title and explanation Debit Credit Amortization Expenses $ 1,13,585 To Patents $ 50,225 To Franchiese $ 63,360