Problem - The intangible assets section of Centaur Company at December 31, 2012, is presented below.
Patents ($86,700 cost less $8,670 amortization) - $78,030
Franchises ($50,200 cost less $20,080 amortization) - 30,120
Total - $108,150
The patent was acquired in January 2012 and has a useful life of 10 years. The franchise was acquired in January 2009 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2013.
Jan. 2 Paid $51,480 legal costs to successfully defend the patent against infringement by another company.
Jan.-June Developed a new product, incurring $146,010 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.
Sept. 1 Paid $49,840 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October.
Oct. 1 Acquired a franchise for $200,000. The franchise has a useful life of 50 years.
Required -
a) Prepare journal entries to record the transactions above.
b) Prepare journal entries to record the 2013 amortization expense.
c) Prepare the intangible assets section of the balance sheet at December 31, 2013.