Information for Naples Corporation’s intangible assets follows:

1. On January 1, 2020, Naples signed an agreement to operate as a franchisee of Copy Service Inc., for an initial franchise fee of $75,000. Of this amount, $35,000 was paid when the agreement was signed and the balance is payable in four annual payments of $10,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the four annual payments discounted at 8% (the implicit rate for a loan of this type) is $33,121. The agreement also provides that 5% of the franchisee’s revenue must be paid to the franchisor each year. The franchisor requires that Naples provide it with some form of assurance verifying the revenue amount used to determine the 5% payment. Naples’s revenue from the franchise for 2020 was $800,000. Naples estimates that the franchise’s useful life will be 10 years.

2. Naples incurred $45,000 in experimental costs in its laboratory to develop a patent, and the patent was granted on January 2, 2020. Legal fees and other costs of patent registration totalled $13,600. Naples estimates that the useful life of the patent will be six years.

3. A trademark was purchased from Shanghai Company for $28,600 on July 1, 2017. The legal costs to successfully defend the trademark totalled $8,160 and were paid on July 1, 2020. Naples estimates that the trademark’s useful life will be 15 years from the acquisition date. Assume that Naples reports using ASPE.

Instructions

a. Prepare a schedule showing the intangible assets section of Naples’s statement of financial position at December 31, 2020. Show supporting calculations in good form.

b. Prepare a schedule showing all expenses resulting from the transactions that would appear on Naples’s income statement for the year ended December 31, 2020. Show supporting calculations in good form.

c. How would your response change under IFRS?

d. What type of report could Naples provide to the franchisor to verify the revenue amount provided?