Review textbook Financial Accounting: Chapter Plant Assets, Natural Resources, and Intangible Assets and solve the problem:
P9-7B The intangible assets section of Time Company at December 31, 2011, is presented below. Patent ($100,000 cost less $10,000 amortization) $ 90,000 Copyright ($60,000 cost less $24,000 amortization) 36,000 Total $126,000 The patent was acquired in January 2011 and has a useful life of 10 years. The copyright was acquired in January 2008 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2012. Jan. 2 Paid $45,000 legal costs to successfully defend the patent against infringement by another company. Jan.-June Developed a new product, incurring $230,000 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 $125,000 to an Xgames star to appear in commercials advertising the company's products. The commercials will air in September and October. Oct. 1 Acquired a copyright for $200,000. The copyright has a useful life of 50 years.
Instructions
(a) Prepare journal entries to record the transactions above.
(b) Prepare journal entries to record the 2012 amortization expense for intangible assets.
(c) Prepare the intangible assets section of the balance sheet at December 31, 2012.
(d) Prepare the note to the financials on Time's intangibles as of December 31, 2012.
E8-3 The ledger of Hixson Company at the end of the current year shows Accounts
Receivable $120,000, Sales $840,000, and Sales Returns and Allowances $30,000.
Journalize Transactions
Journalize entries to record allowance for doubtful accounts using two different bases.
(a) If Hixson uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Hixson determines that Fell's $1,400 balance is uncollectible.
DATE ACCOUNT TITLE DEBIT CREDIT
(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of
net sales, and (2) 10% of accounts receivable.
DATE ACCOUNT TITLE DEBIT CREDIT
DATE ACCOUNT TITLE DEBIT CREDIT
(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net
sales and (2) 6% of accounts receivable.
DATE ACCOUNT TITLE DEBIT CREDIT
DATE ACCOUNT TITLE DEBIT CREDIT