The intangible assets section of Cedeno Corporation’s balance sheet at December

Question

The intangible assets section of Cedeno Corporation’s balance sheet at December 31, 2014, is presented here. Patents ($89,000 cost less $6,940 amortization) $82,060 Copyrights ($44,600 cost less $31,500 amortization) 13,100 Total $95,160 The patent was acquired in January 2014 and has a useful life of 10 years. The copyright was acquired in January 2008 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2015. Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company. Jan.– June Developed a new product, incurring $244,400 in research and development costs. A patent was granted for the product on July 1, and its useful life is equal to its legal life. Legal and other costs for the patent were $20,000. Sept. 1 Paid $45,700 to a quarterback to appear in commercials advertising the company’s products. The commercials will air in September and October. Oct. 1 Acquired a copyright for $276,000. The copyright has a useful life and legal life of 50 years. Prepare journal entries to record the transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Prepare journal entries to record the 2015 amortization expense for intangible assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date. Account Titles and Explanation Debit Credit Dec. 31 (To record amortization of patents) 31 (To record amortization of copyrights) Prepare the intangible assets section of the balance sheet at December 31, 2015. Cedeno Corporation’s Balance Sheet (Partial) December 31, 2015 $ $

Explanation / Answer

Date Account Title Debit Credit 2-Jan-15 Legal and Other expenses 45000 Cash 45000 2-Jan-15 Patent 45000 Legal and Other expenses 45000 1-Jul-15 Research and Development Expenses 244400 Legal and Other Expenses 20000 Cash 264400 1-Jul-15 Patent 264400 Research and Development Expenses 244400 Legal and Other Expenses 20000 1-Sep-15 Prepaid Commercial Expenses 45700 Cash 45700 1-Oct-15 Copyright 276000 Cash 276000 Amortization: Beginning Patent at cost 82060 Annual amortization 6940 Annual amortization on Legal cost (45000/9) 5000 Patent Developed 264400 Annual Amortization over 20 years 13220 annual Amortization (391460/10) 25160 Beginning Copyright at cost 44600 Annual Amoutization (31500/7year) 4500 Copy right Acquired 244400 Useful life 50 Annual Amoutization 4888 Total Amortization for 2015 9388 Date Account Title Debit Credit 31-Dec-15 Amortization expenses 34548 Accumulated Amortization-Patent 25160 Accumulated Amortization-Copyright 9388 Balance Sheet: Intangibles Patent at cost 398400 Copyright at cost 289000 Total Intangibles 687400

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