Selected accounts of the Harvard Medical Labs are listed below. Also given are some transactions and events


Selected accounts of the Harvard Medical Labs are listed below. Also given are some transactions and events that took place at the company during 2016.
1. Record in general journal form the transactions for 2016 described.
2. Record amortization of the intangible assets for the year ended December 31, 2016.
3. Indicate what steps should be taken, if any, to properly account for the balance of $1,200,000 in the Goodwill account on December 31. The following accounts related to intangible assets are found in Harvard's general ledger:
Cash Research and Development Expense
Patents Amortization of Patents
Computer Software Amortization of Computer Software
Goodwill Impairment of Intangibles
April 10 Purchased for cash of $420,000 a patent related to a chemical compound. It has a legal life of 12 years remaining, but is expected to be used for only 8 years because of new patents for similar products being developed.
Sept. 1 Purchased a computer software program for $36,000 in cash from a computer software supply firm. The software program is to be used in the company's inventory control system and has an estimated useful life of seven years.
Dec. 31 (Date of journal entry, reflecting summary for year.) During year, made cash expenditures of $4,000,000 for research and development costs related to a new electronic medical procedure being developed. Researchers have worked on the project for 10 months of the year and think the project will result in a valuable patent.
Dec. 31 The company examined the balance of $1,900,000 in the Goodwill account. This balance arose from purchase of another business two years earlier and represents the amount paid for the acquired business in excess of the value of the net identifiable assets acquired. The examination concluded that the activities acquired have continued to be very profitable and that there is noreason to record impairment on the $1,900,000 balance.
Analyze: Suppose that the examination of goodwill had revealed that the benefits (future profits) resulting from the acquisition two years ago are decreasing. Based on the estimated value of the excess of the future profits over the value of the net assets acquired, the value of goodwill is estimated to be currently only $1,300,000. What accounting entry, if any, should be made to record this fact?
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...
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College Accounting Chapters 1-30

ISBN: 978-0077862398

14th edition

Authors: John Price, M. David Haddock, Michael Farina

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