On Date of Transaction On December 31, 2011 Minton paid Grand Company $500,000 f

Question

On Date of Transaction On December 31, 2011 Minton paid Grand Company $500,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Minton is in business. Minton spent $600,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful. In January, 2011. Minton's application for a patent (#2 above) was granted. Legal and registration costs incurred were $120,000, The patent runs for 20 years. The manufacturing process will be useful to Minton for 10 years. Minton incurred $192,000 in successfully defend-ing one of its patents in an infringement suit. The patent expires during December, 2014. Minton incurred $480,000 in an unsuccessful potent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $252,000, is deemed worthless. Minton paid Snood laboratories $104,000 for research and development work performed by Sneed under contract for Minton. The benefits arc expected to last six years.

Explanation / Answer

Date Details Debit Credit Grand Company $500,000        Cash $500,000 (To record the payment for using the name and logo) Patents $600,000    Cash 600,000 (To record for a patent expenses) Jan-11 Patents $120,000    Cash 120,000 (To record legal fees related to patent) 31-Dec Patent Amortization Expenses 192,000      Patents                 192,000 (To record amortization of patent) 31-Dec Loss on impairment $252,000    Patents 252,000 (To record unamortized cost) 31-Dec R&D Expenses $104,000     Cash 104,000 (To record Research & Development expenses)

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