The following information concerns the intangible assets of Epstein Corporation:

Question

The following information concerns the intangible assets of Epstein Corporation: a. On June 30, 2013, Epstein completed the acquisition of the Johnstone Corporation for $1,940,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,650,000. b. Included in the assets purchased from Johnstone was a patent that was valued at $68,600. The remaining legal life of the patent was 12 years, but Epstein believes that the patent will only be useful for another 7 years. c. Epstein acquired a franchise on October 1, 2013, by paying an initial franchise fee of $176,400. The contractual life of the franchise is 9 years. Required: 1. Prepare year-end adjusting journal entries to record amortization expense on the intangibles at December 31, 2013. (In cases where no entry is required, please select the option "No journal entry required" for your answers to grade correctly. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.) General Journal Debit Credit To record amortization of goodwill. To record amortization of patent. To record amortization of franchise. 2. Prepare the intangible asset section of the December 31, 2013, balance sheet. (Do not round intermediate calculations.) Balance Sheet December 31, 2013 Intangible assets: Goodwill $ Patent Franchise Total intangibles $

Explanation / Answer

PART 1 Date Particulars Debit Credit 2013 $ $ Dec-31 Amortization Expense A/c                              Dr. 72700             To Goodwill A/c 58000             To Franchise A/c 4900             To Patent A/c 9800 Intangible assets amortized) Working Notes 1 Calculation of Goodwill Purchase price- Fair value of Net Assets 1940000-1650000 290000 2 Calculation of Goodwill Amortisation Total goodwill/No of use of Goodwill 290000/5 (Assume life of Goodwill is 5 years) 58000 3 Calculation of Franchise Amortisation Total Cost/ life 176400/9*3/12 (bcoz it is purchased in october) 4900 4 Calculation of Patent Amortisation 68600/7 9800 Part 2 Intangible Assets 1. Goodwill 290000 Less Amortization 58000 232000 2. Franchise 176400 Less; Amortisation 4900 171500 3. Patent 68600 Less; Amortisation 9800 58800 Total assets 462300

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