Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly

Question:

Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by Wasp Company in 2010.

1. Wasp developed a new manufacturing process, incurring research and development costs of $110,000. The company also purchased a patent for $50,000. In early January, Wasp capitalized $160,000 as the cost of the patents. Patent amortization expense of $8,000 was recorded based on a 20-year useful life.

2. On July 1, 2010, Wasp purchased a small company and as a result acquired goodwill of $200,000.Wasp recorded a half-year’s amortization in 2010, based on a 50-year life ($2,000 amortization). The goodwill has an indefinite life.

Instructions

Prepare all journal entries necessary to correct any errors made during 2010. Assume the books have not yet been closed for 2010.

Goodwill
Goodwill 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...