Ex. 246
Here are selected 2017 transactions of Howe Corporation.
Jan. 1Retired a piece of equipment that was purchased on January 1, 2007. The equipment cost $55,000 and had a useful life of 10 years with no salvage value.
June 30Sold equipment that was purchased on January 1, 2015. The equipment cost $78,000 and had a useful life of 3 years with no salvage value. The equipment was sold for $9,000 cash.
Dec. 31Sold equipment for $12,500 cash. The equipment cost $43,000 when it was purchased on January 1, 2014, and was depreciated based on a 5-year useful life with a $3,000 salvage value.
Instructions
Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Howe Corporation uses straight-line depreciation.
Ex. 247
During the current year Knight Company incurred several expenditures. Briefly explain whether the expenditures listed below should be recorded as an operating expense or as an intangible asset. If you view the expenditure as an intangible asset, indicate the number of years over which the asset should be amortized. Explain your answer.
(a)Spent $30,000 in legal costs in a patent defense suit. The patent was unsuccessfully defended.
(b)Purchased a trademark from another company. The trademark can be renewed indefinitely. Knight Company expected the trademark to contribute to revenue indefinitely.
(c)Knight Company acquires a patent for $2,000,000. The company selling the patent has spent $1,000,000 on the research and development of it. The patent has a remaining life of 15 years.
(d)Knight Company is spending considerable time and money in developing a different patent for another product. So far $3,000,000 has been spent this year on research and development. Knight Company is very confident they will obtain this patent in the next few years.
Ex. 248
Nelson Company, organized in 2017, has these transactions related to intangible assets in that year:
Jan.2Purchased a patent (5-year life) $325,000.
Apr.1Goodwill purchased (indefinite life) $360,000.
July1Acquired a 9-year franchise; expiration date July 1, 2026, $720,000.
Sept.1Research and development costs $185,000.
Instructions
(a)Prepare the necessary entries to record these intangibles. All costs incurred were for cash.
(b)Make the entries as of December 31, 2017, recording any necessary amortization.
(c)Indicate what the balance should be on December 31, 2017.
