Due to rapid employee turnover in the accounting department, the following transactions involving intangible assets and goodwill were recorded in a questionable way by Rachael Summers, a new accountant who was just hired by Balty Ltd. in the year ended December 31, 2012:

1. Balty developed an electronic monitoring device for running shoes which should have a useful life of three years. It incurred research costs of $140,000 and development costs with probable future benefits of $90,000. The development phase ended on May 1, 2012. Rachael recorded all of these costs in the Patent account.

2. The company registered the patent for the "cyber shoe" device developed in transaction 1 above on February 1, 2012. Legal fees and registration costs totalled $44,000. These costs were recorded in the Legal Fees Expense account.

3. During May the company successfully fought off a competitor in court to defend its patent, incurring $76,000 of legal fees. These costs were also debited to the Legal Fees Expense account.

4. The company recorded $11,500 of annual amortization for the patent over its legal life of 20 years [$140,000 + $90,000 = $230,000 ÷ 20 years]. The patent's expected useful life is five years.

5. Balty tested the patent for impairment at the end of 2012 and found that its recoverable amount of $115,000 was less than its carrying amount of $218,500 ($230,000 - $11,500). Rachael recorded an impairment loss of $103,500.

Instructions

Prepare the necessary journal entries to correct any errors made in recording the above transactions.