on january 1, sandro purchased a franchise for $75,000. $15,000 was paid when th
ID: 2364501 • Letter: O
Question
on january 1, sandro purchased a franchise for $75,000. $15,000 was paid when the agreement was signed and the balance is is payble in 4 annual payments of $15,000.the present value at jan 1, 2012, of the 4 annual payments discounted at 14% is $43,700.the agreement also provides that 5%revenue from the frachise must be paid to the frachisor annualy. sandors revenue from 2012 was $900,000. sandro incurred $65,000of expermintal and development costs.legal fee and other cost $17,600. useful life of 8 years trademark was purchaed for $36,000 on july 1,2000. expendiutres cost $10,200. useful life 20 years questions prepare a schedual showing the intangible assets section of sandro's balance shet and dec 31, 2012. show supporting computation in good form prepare a schedula showing all expenses resulitng from the transactions that would appear on sandro's income statment for year eneded dec 2012. shwo supporting compuatationsExplanation / Answer
. A) Dec 31, 2001 Franchise Net of accumulated
amorization of $5,870 (Schedule 1) $52,830
Patent Net of accumulated amortiation of $1700 (Schedule 2) 11,900
Trademark, net of accumulated amortization of $5,840 (Schedule 3) 34,320
Total intangible assets 99,050
Schedule 1 Franchise on Jan 1
Cost of Franchise ($15,000 + $43,700) 2007 amortization ($58,000 x 1/10)
Cost of franchise, net of amortization $58,700 -5,870 $52,830
Schedule 2 Patent Cost of securing patent 2007 amortization ($13,600 x 1/8) Cost of patent, net of amortization $13,600 -1,700 $11,900
Schedule 3
Trademark Cost of trademark
Amortization from 7/2004 to 07/2007 (32,000 x 3/20) (4,800)
Book value after legal defense Cost of successfule legal defense on July 2007
Book value after legal defense Amortizat
ion, 7/01/2004 to 12/31/2004 ( 35,360 x 1/17 x 6/12)
Cost of trademark
, net of amortization 32,000 -4,800 27,200 8,160 35,360 -1,040 57,736 B)
Schedule of expense resulting from intagible assets transaction for YE
Interest expense: (43,700 x 14%) franchise amortization (schedule 1)
Franchise fee (950,000 x 5%)
patent amortizxation (schedule 2)
trademark amortization (32,000 x 1/20 x 6/12 + 35,360 x 1/17 x 6/12)
Total intangible assets 6,118 5,870 47,500 1,700 1,840 63,028
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