Intangible Assets Debit Credit Balance Account Titles and Explanation Debit Cred

Question

Intangible Assets

Debit

Credit

Balance

Account Titles and Explanation

Debit

Credit

(To correct the account)

As the recently appointed auditor for Pronghorn Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2017, are prepared. The controller for Pronghorn Corporation mentions that only one account is kept for intangible assets. The account is shown below.

Intangible Assets

Debit

Credit

Balance

Jan. 4 Research and development costs 942,000 942,000 Jan. 5 Legal costs to obtain patent 74,880 1,016,880 Jan. 31 Payment of 7 months’ rent on property    leased by Bryan 92,400 1,109,280 Feb. 11 Premium on common stock 242,000 867,280 March 31 Unamortized bond discount on bonds    due March 31, 2037 112,800 980,080 April 30 Promotional expenses related to    start-up of business 232,300 1,212,380 June 30 Operating losses for first 6 months 254,500 1,466,880
Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Research and Development Expense

Patents

Rent Expense

Prepaid Rent

Advertising Expense

Income Summary

Discount on Bonds Payable

Interest Expense

Paid-in Capital in Excess of Par - Common Stock

Intangible Assets

(To correct the account)

Explanation / Answer

SOLUTION

JOURNAL ENTRY-

Account Titles and Explanation Debit ($) Credit ($) Research and Development Expense 942,000 Patents 74,880 Rent Expense ($92,400 *5/7) 66,000 Prepaid Rent ($92,400 *2/7) 26,400 Advertising Expense 232,300 Income Summary 254,500 Discount on Bonds Payable (112,800-1,410) 111,390 Interest Expense ($112,800/240* months) * 3 1,410   Paid-in Capital in Excess of Par - Common Stock 242,000 Intangible assets 1,466,880

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