Problem: Information concerning Richard Siu Ltd., which trades on the TSX Venture Exchange, is as follows:
On January 1, 2022, Siu signed an agreement to operate as a franchisee of Rapid Copy Service, Inc. for an initial franchise fee of $78,000. The agreement provided that the down payment was not refundable and no future services were required of the franchisor. The agreement also provided that 15% of the revenue from the franchise must be paid to the franchisor annually. Siu's revenue from the franchise for the current year was $800,000. Siu estimated the useful life of the franchise to be 10 years.
Siu Incurred $79,000 of costs to advertise the new opening of Rapid Copy Service and $10,000 of training costs for its new employees. As indicated in #1 above, the franchise is estimated to have a useful life of 10 years but management believes that the advertising will bring in new customers only for the next 2 years and employees will likely continue working with the company for 3 years.
Siu incurred $65,000 of experimental research costs in its laboratory to develop a patent that was granted on January 2, 2022. Legal fees and other costs associated with registration of the patent totaled $13,200. Siu estimates that the useful life of the patent will be eight years.
A trademark was purchased from Calgary Company for $32,000 on July 2, 2019. Expenditures for successful litigation in defence of the trademark totaling $8,000 were paid on July 1, 2022. Siu estimated the useful life of the trademark would be 20 years from the date of acquisition. Siu uses the straight-line depreciation for all it assets.
Required:
Prepare a schedule showing the intangibles section of Slurs balance sheet at December 31 of the current year. Show supporting computations in good form.