Due to rapid turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by Riley Co. in the year ended December 31, 2024: 1. Riley developed a new manufacturing process early in the year, incurring research
Due to rapid turnover in the accounting department, the following transactions involving intangible assets were improperly recorded by Riley Co. in the year ended December 31, 2024:
1. Riley developed a new manufacturing process early in the year, incurring research and development costs of $160,000. Of this amount, 45% was considered to be development costs that could be capitalized. Riley recorded the entire $160,000 in the Patents account and amortized it using a 15-year estimated useful life.
2. On July 1, 2024, Riley purchased a small company and, as a result of the purchase, recorded goodwill of $400,000. Riley recorded a half year’s amortization on the goodwill in 2024 based on a 40-year useful life and credited the Goodwill account.
3. Several years ago, Riley paid $70,000 for a license to be the exclusive Canadian distributor of a Danish beer. In 2021, Riley determined there was an impairment of $40,000 in the value of the license and recorded the loss. In 2024, because of a change in consumer tastes, the value of the license increased to $80,000. Riley recorded the $50,000 increase in the license's value by crediting Impairment Loss and debiting the License account. Management felt the company should consistently record increases and decreases in value.
Assuming that Riley reports under IFRS, prepare the journal entries that are needed to correct the errors made during 2024.
This problem has been solved!
- Tutor Answer
1. 2. 3. Research Expense ($160,000 x 55%) …View the full answer
A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
Students also viewed these Business questions