The intangible assets and goodwill reported by Ip Corp. at December 31, 2017, follow:
Patents....................................................$70,000
Less: Accumulated amortization..............14,000................$ 56,000
Copyrights..............................................$48,000
Less: Accumulated amortization..............28,800...................19,200
Goodwill...............................................................................210,000
Total....................................................................................$285,200
The patents were acquired in January 2016 and have a useful life of 10 years. A copyright (#1) was acquired in January 2012 and also has a useful life of 10 years. The company has a December 31 year end and prepares adjusting journal entries annually.
The following cash transactions may have affected intangible assets and goodwill during 2018:
Jan. 2 Paid $22,500 in legal costs to successfully defend the patents against infringement by another company. Determined that the revised annual amortization for the patents will be $9,812.
July 1 Developed a new product, incurring $220,000 in research costs and $60,000 in development costs with probable future benefits. The useful life of the new product is equal to 20 years.
Sept. 1 Paid $11,000 to an Olympic rower to appear in commercials advertising the company's products. The commercials will air in September.
Oct. 1 Acquired a second copyright for $16,000. Copyright #2 has a useful life of five years.
Dec. 31 Determined the recoverable amount of the goodwill to be $175,000. There was no indication that the patents or copyrights were impaired.
Instructions
(a) Prepare the journal entries to record the above transactions.
(b) Prepare any adjusting journal entries required at December 31.
(c) Show the presentation of the intangible assets and goodwill on the statement of financial position at December 31, 2018.