Collins Ltd. has these transactions related to intangible assets and goodwill in 2012, its first year of
Question:
Collins Ltd. has these transactions related to intangible assets and goodwill in 2012, its first year of operations:
Jan. 2 Purchased a patent with an estimated useful life of five years and a legal life of 20 years for $40,000.
Apr. 1 Acquired another company and recorded goodwill of $300,000 as part of the purchase.
July 1 Acquired a franchise for $250,000. The franchise agreement expires on July 1, 2019.
Sept. 1 Incurred research costs of $150,000.
30 Incurred development costs of $50,000. No marketable product has been identified as yet.
Dec. 31 Recorded annual amortization.
31 Tested the intangible assets for impairment. Recoverable amounts exceeded carrying amounts in all cases. Also tested goodwill and determined that it had a recoverable amount of $270,000.
Instructions
(a) Prepare the entries to record the above transactions. Assume all costs incurred were for cash.
(b) Show the presentation of the intangible assets and good will on the statement of financial position at December 31, 2012.
GoodwillGoodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented...
Step by Step Answer:
a Jan 2 Patents 40000 Cash 40000 April 1 Goodwill 300000 Cash 300000 July 1 Franchise 250000 Cash 25...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118024492
5th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
