E10-13 Gill Company, organized in 2017, has the following transactions related t

Question

E10-13 Gill Company, organized in 2017, has the following transactions related to intan Prepare entries to set up gible assets. Purchased patent (7-year life) Goodwill purchased (indefinite life) 10-year franchise; expiration date 7/1/2027 Research and development costs $595,000 360,000 480,000 185,000 appropriate accounts for different intangibles; amortize intangible assets. (LO 4) Instructions Prepare the necessary entries to record these intangibles. All costs incurred were for cash Make the adjusting entries as of December 31, 2017, recording any necessary amortization and reflecting all balances accurately as of that date

Explanation / Answer

Journal Entries:

Account Balances as on 12/31/2017:

Balance in Patent = 595,000 - 85,000 = 510,000

Balance in Franchise = 480,000 - 24,000 = 456,000

Balace in Goodwill = 360,000

DATE PARTICULARS DEBIT CREDIT 1/2/17 Patent 595,000 To Cash 595,000 4/1/17 Goodwill 360,000 To Cash 360,000 7/1/17 Franchise 480,000 To Cash 480,000 9/1/17 Research and development Costs 185,000 To Cash 185,000 12/31/17 Amortization Expense - Patent 85,000 To Patent 85,000 12/31/17 No entry to record amortization of Goodwill as it has an indefinite life 12/31/17 Amortization Expense - Franchise 24,000 To Franchise 24,000 *-----------------------------------*---------------------------* Notes: 1. Amount of Patent amortized = 595,000/7 = 85,000 2. Amount of Franchise amortized = 480,000/10 = 48,000*6/12 = 24,000

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