The intangible assets reported by Ip Company at December 31, 2013, follow:

Patent #1 ......................................$80,000

Less: Accumulated amortization ........... 16,000 ............ $ 64,000

Copyright #1 .................................$48,000

Less: Accumulated amortization .......... 28,800 ........... 19,200

Goodwill ............................................................... 220,000

Total ....................................................................$303,200

Patent #1 was acquired in January 2012 and has an estimated useful life of 10 years. Copyright #1 was acquired in January 2008 and also has an estimated useful life of 10 years. The following cash transactions may have affected intangible assets and goodwill during the year 2014:

Jan. 2 Paid $23,200 of legal costs to successfully defend Patent #1 against infringement by another company.

June 30 Developed a new product, incurring $180,000 in research costs and $60,000 in development costs, which were paid in cash. Patent #2 was granted for the product on July 1. Its estimated useful life is equal to its legal life of 20 years.

Sept. 1 Paid $12,000 to an Olympic athlete to appear in commercials advertising the company's products. The commercials will air in September.

Oct. 1 Acquired a second copyright for $18,000 cash. Copyright #2 has an estimated useful life of six years.

Dec. 31 Determined the recoverable amount of the goodwill to be $240,000. The company had originally paid $250,000 for the goodwill in 2011. In 2012, the company had recorded a $30,000 impairment loss on the goodwill. There is no indication that the patents and copyrights were impaired.

Instructions

(a) Record the above transactions.

(b) Prepare any adjusting journal entries required at December 31, 2014, the company's year end.

(c) Show how the intangible assets and goodwill will be reported on the balance sheet at December 31, 2014.

TAKING IT FURTHER

Since intangible assets do not have physical substance, why are they considered to be assets?