Munn Inc. reported its Other noncurrent asset account balances on December 31 of Year 2 as follows.

	Dec. 31, Year 2
Patent	$422,400
Accumulated amortization	52,800
Net patent	$369,600

Information relating to these Other noncurrent assets for Year 3 follows.

1. The patent was purchased from Grey Company on January 2 of Year 1, when the remaining legal life was 16 years. On January 2 of Year 3, Munn determined that the remaining useful life of the patent was only six more years.

2. On January 2 of Year 3, in connection with the purchase of a trademark from Cody Corp., the parties entered into a noncompete agreement. Munn paid Cody $1,760,000, of which 75% related to the trademark and 25% reflected Cody’s agreement not to compete for a period of five years in the line of business covered by the trademark. Munn considers the life of the trademark to be indefinite.

3. On January 1 of Year 3, Munn acquired all the noncash assets and assumed all liabilities of Amboy Company at a cash purchase price of $2,640,000. Munn determined that the fair value of the identifiable net assets acquired in the transaction is $1,760,000.

4. Munn incurred the following research and development costs in Year 3.

Salaries and related expenses related to the development of patents	$275,000
Supplies	33,000
Allocated facility costs	44,000

Required

a. Prepare a schedule of amortization for Year 3 showing amortization expense that applies to each intangible asset. The company amortizes intangible assets using the straight-line method.

Amortization Expense
Patent
Noncompete agreement
Total

b. Prepare the balance sheet presentation of intangible assets for Munn on December 31 of Year 3, and the income statement presentation for the year ended December 31 of Year 3.

Munn Inc.
Balance Sheet
December 31, Year 3
Intangible assets
Patent, net
Trademark
Noncompete agreement, net
Goodwill

Munn Inc.
Income Statement
For the year ended December 31, Year 3
Other expenses
Amortization expense
Research and development expense

Answer rating: 100% (QA)

a Schedule of Amortization for Year 3 Patent The patent was purchased with a remaining legal life of ... View the full answer