Problem
Reichenbach Co., organized in 2016, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2017 and 2018.
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Intangible Assets
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7/1/17
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8-year franchise; expiration date 6/30/25
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$48,000
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10/1/17
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Advance payment on laboratory space (2-year lease)
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24,000
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12/31/17
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Net loss for 2017 including state incorporation fee, $1,000,
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and related legal fees of organizing, $5,000 (all fees incurred in 2017)
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16,000
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1/2/18
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Patent purchased (10-year life)
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84,000
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3/1/18
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Cost of developing a secret formula (indefinite life)
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75,000
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4/1/18
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Goodwill purchased (indefinite life)
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278,400
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6/1/18
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Legal fee for successful defense of patent purchased above
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12,650
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9/1/18
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Research and development costs
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160,000
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Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2018, recording any necessary amortization.