Problem - Correct Intangible Asset Account
Reichenbach Co., organized in 2009, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2009 and 2010.
Intangible Assets
7/1/09 8-year franchise; expiration date 6/30/17 $ 48,000
10/1/09 Advance payment on laboratory space (2-year lease) 24,000
12/31/09 Net loss for 2009 including state incorporation fee, $1,000, and related legal fees of organizing, $5,000 (all fees incurred in 2009) 16,000
1/2/10 Patent purchased (10-year life) 84,000
3/1/10 Cost of developing a secret formula (indefinite life)
75,000
4/1/10 Goodwill purchased (indefinite life) 278,400
6/1/10 Legal fee for successful defense of patent purchased above 12,650
9/1/10 Research and development costs 160,000
Instructions - 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, 2010, recording any necessary amortization and reflecting all balances accurately as of that date.