Task: (Correct Intangible Asset Account)
Esplanade Co., organized in 2006, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2006 and 2007.
Intangible Assets
7/1/06 8-year franchise; expiration date 6/30/14 $ 42,000
10/1/06 Advance payment on laboratory space (2-year lease) 28,000
12/31/06 Net loss for 2006 including state incorporation fee, $1,000, and related legal fees of organizing, $5,000 (all fees incurred in 2006) 16,000
1/2/07 Patent purchased (10-year life) 74,000
3/1/07 Cost of developing a secret formula (indefinite life) 75,000
4/1/07 Goodwill purchased (indefinite life) 278,400
6/1/07 Legal fee for successful defense of patent purchased above 12,650
9/1/07 Research and development costs 160,000
Hint: (LO 2 and LO 3)
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, 2007, recording