Date Account Titles and Explanation Debit Credit Jan. 2 Jan.–June Sept. 1 Oct. 1

Question

Date

Account Titles and Explanation

Debit

Credit

Jan. 2

Jan.–June

Sept. 1

Oct. 1

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

(To record patents amortisation.)

Dec. 31

(To record franchise amortisation.)

Sappelt Company
Balance Sheet (Partial)
December 31, 2015

The intangible assets section of Sappelt Company at December 31, 2014, is presented below.
Patents ($87,700 cost less $8,770 amortization) $78,930 Franchises ($52,400 cost less $20,960 amortization) 31,440     Total $110,370
The patent was acquired in January 2014 and has a useful life of 10 years. The franchise was acquired in January 2011 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2015.
Jan. 2 Paid $26,460 legal costs to successfully defend the patent against infringement by another company. Jan.–June Developed a new product, incurring $132,770 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life. Sept. 1 Paid $49,720 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October. Oct. 1 Acquired a franchise for $114,000. The franchise has a useful life of 50 years.

Explanation / Answer

1.

Jan 2

Patent legal fees A/C Dr 26460

To Cash A/C 26460

Jan-June

To Cash A/C 132770

Sep 1

To Cash A/C 49720

Oct 1

To Franchise A/C 2700

Amortization expense

Dec 31 Amortization-Patent A/C Dr 8770

To Patent A/C 8770

Dec 31 Amortization -Franchise A/C Dr 5240

   To Franchise A/C 5240

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