The following transactions involving intangible assets of Snorlax Corporation oc

Question

The following transactions involving intangible assets of Snorlax Corporation occurred on or near December 31, 2017.

Snorlax paid Drowzee Company $200,000 for the exclusive right to market a particular product, using the Drowzee name and logo in promotional material. The franchise runs for as long as Snorlax is in business. Snorlax decided to amortize the franchise over 25 years.

Snorlax spent $300,000 developing a new manufacturing process and has applied for a patent. It believes that its application will be successful and that the process will be successfully implemented and used for 10 years.

In January, 2018, Snorlax 's application for a patent (#2 above) was granted. Legal and registration costs incurred were $35,000. The patent runs for 17 years from the grant date. The manufacturing process will be useful to Snorlax for 10 years.

Snorlax incurred $90,000 in successfully defending another of its patents in an infringement suit. The patent expires during December, 2018.

Snorlax incurred $200,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $99,000, is deemed worthless.

Snorlax paid Mexico Laboratories $52,000 for research work performed by Mexico under contract for Snorlax.

Required

1. Record the journal entry on the date of the transaction

2. Record the journal entry at December 31, 2018 (if no entry is required, write “none needed”).

Explanation / Answer

Journal entries in the books of Snorlax Corporation:

31.12.2017

Intangable Asset a/c Dr $200000

To Cash a/c $200000

Intangable Asset a/c Dr $335000

To Cash a/c $335000

Intangable Asset a/c Dr $90000

To Cash a/c $90000

Expenses for unsucessful patent a/c Dr $ 200000

To Cash a/c 200000

Research a/c Dr $52000

To Cash a/c $52000

31.12.2018

Amortaization of intangible asset a/c Dr $131500

To Intangible asset a/c $131500

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