Barnes Corporation had the following transactions: May 1 st , 2014, Acquired a f
ID: 2444686 • Letter: B
Question
Barnes Corporation had the following transactions:
May 1st, 2014, Acquired a franchise for $210,000. The franchise agreement expires on April 30th, 2019.
June 1st, 2014, Incurred research costs of $40,000 and development costs of $100,000. A marketable product has been identified and production will commence in the near future. The product is expected to have a useful life of 20 years.
December 1st, 2014, Acquired another company and recorded goodwill of $500,000 as part of the purchase.
December 31st, 2014, Recorded annual amortization. Tested the intangible assets for impairment. Recoverable amounts exceeded carrying amounts in all cases. Also tested goodwill and determined that it had a recoverable amount of $450,000.
Calculate the amounts that would be presented on the Balance Sheet (Statement of Financial Position) at December 31, 2014 after all year end entries have been done. Please DO NOT include items that should be on the income statement.
If the balance is zero (nil) please place a zero box below.
Hint: you may wish to prepare journal entries and/or t-accounts for the above transactions.
Amount in the Account on Balance Sheet
Amount in the Related Accumulated Amortization account, if applicable
Franchise
$
$
Goodwill
$
$
Research
$
$
Development
$
$
Amount in the Account on Balance Sheet
Amount in the Related Accumulated Amortization account, if applicable
Franchise
$
$
Goodwill
$
$
Research
$
$
Development
$
$
Explanation / Answer
Amount in the Account on Balance Sheet Amount in the Related Accumulated Amortization account, if applicable Franchise 182000 28000 Goodwill 450000 50000 Research 38833.33 1166.67 Development 97083.33 2916.67 Franchise cost 210000 Life in years 5 Annual Amortization 42000 Amortization for 2014 28000 Balance as on 31-Dec-2014 (210000-28000) Research Development Costs Incurred 40000 100000 Useful life in years 20 20 Annual Amortization 2000 5000 Amortization for 2014 (for 7 month) 1166.67 2916.67 Book value as on 31st Dec-2014 38833.33 97083.33
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